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Gordana Kovačević, ENT We are ready to show other Croatian companies how to work successfully in the Russian market using our example from 2012

President Ivo Josipović Around 250,000 individuals with frozen accounts with creditors claiming around €2.38 billion

Construction in endless crisis Throughout 2012, a total of 8,330 construction approvals were issued, down 13.2% over 2011

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Croatian Business & Finance Monthly Established in 1953 Monday / 1st April / 2013 Year VI / No 0224 www.privredni.hr

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pvinternational pv international C R O A T I A N

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GOLDEN KUNA AWARDS AT THE CROATIAN ECONOMIC CHAMBER

VIDOŠEVIĆ: NO EASY SOLUTIONS OUT OF THE CRISIS The state still controls over 50% of the economy, and the majority of those working in the market are tied to state orders Igor Vukić he problems of the Croatian economy cannot be solved overnight, and it must be clear to everyone that an easy solution out of the crisis does not exist. Croatia has had a history of erroneous economic policies that have created a poor economic structure, so a wide social consensus is now required to overcome the crisis, said CCE President Nadan Vidošević during the Golden Kuna awards ceremony. He illustrated the need for consensus with the example of obligations of the Ministry of Finance. Each month the Ministry must secure an income for almost 2.5 million people. On the other hand, there are less than 200,000 working in the predominantly privatised processing industry. Therefore, it is not strange that the priorities of the policies are those 2.5 million, while the others are left to themselves. Such politics has brought us to where we are today. Regardless of what some might say, neoliberalism did not govern Croatia in this aspect. The state still controls over 50% of the economy, and the majority of those working in the market are tied to state orders. Therefore, a social consensus could result in a new concept that

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would lead to greater progress, Vidošević opined. More efficient dealings with the public sector Vidošević added the consensus should not start with searching for the culprit for the present situation, but with defining a foundation for a new economic model. Firstly, Croatia’s excellent international-political status should be used. “We are about to join the EU, which proves we belong to the family of European countries. Croatia has an extremely valuable geopolitical position, which includes the Mediterranean, Central Europe and even the Orient.” The anti-crisis consensus should be accepted by the majority of those in public life, since even Vidošević is aware that it will be difficult to obtain total con-

A wide social consensus is now required to overcome the crisis sensus, should clearly define the possibilities for private and public capital. Among other aspects, private investors should be encouraged to participate in the market, and this rôle should be played by the Croatian Bank for

Reconstruction and Development as well as commercial banks. The public sector could be dealt with far more efficiently, and national education should not be neglected in finding an exit from the crisis, the President noted. Socially responsible business as an example President Ivo Josipović noted that many of those who had received the Golden Kuna award thanked their employees, and he praised this type of approach. A sense of community and cooperation could lead to greater results even in an uncompetitive country like the current Croatia. President Josipović therefore invited the Government to continue with those reforms that will improve investment conditions. The President agreed a social consensus was needed, adding that mutual values and development goals should be set, and they should also include support to innovation and science. He also reminded entrepreneurs not to forget that socially responsible business does not only mean ‘kind’ gestures; it should be a model of behaviour where private interest is balanced with wider social development, and these values have been included in the Golden Kuna Awards

RECIPIENTS GOLDEN KUNA FOR LARGE-SIZED ENTREPRENEURS

AD Plastik GOLDEN KUNA FOR MEDIUM-SIZED COMPANIES

Končar Instrument transformers Inc. GOLDEN KUNA FOR SMALL-SIZED COMPANIES

Šestan-Busch GOLDEN KUNA FOR THE MOST SUCCESSFUL BANK

Erste bank GOLDEN KUNA FOR BEST INSURANCE COMPANY

Allianz Zagreb GOLDEN KUNA FOR LIFETIME ACHIEVEMENT

Alica Wertheimer-Baletić GOLDEN KUNA FOR INNOVATION

Bernarda AND RASCO


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Privredni vjesnik Year VI No 224

( 1958

the year when ENT began exporting to Russia

( €0.25 billion earned by ENT in 2012

Gordana Kovačević, Director of Ericsson Nikola Tesla

Recipe for success: in that are not the great

We share our knowledge in various markets, especially the demanding Russian. We exchange information on how to the Russian market using our example from 2012 Drago Živković n 2012, Ericsson Nikola Tesla achieved an impressive revenue growth of 64% (€0.25 billion), and an even more impressive nett profit growth of 353% (€16.92 million). Thus the stockholders will profit from a dividend payment of €2.7 per share, or €20 per super-normal stock. However, since almost

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We feel responsible for adapting the university to the demands of the market in which we work the entire revenue growth is the result of a single large contract with Rostelecom, Director Gordana Kovačić feels it is unrealistic to expect the same results will repeat this year What is the secret to your success during these recessionary times? Ericsson Nikola Tesla is a company of continuity. I often highlight it is important to keep our focus every year, even when you may not be achieving good results in terms of profit or revenue. It is precisely in such times that we should invest in new products, new solutions or marketing in those markets one wishes to attract new buyers and new market niches. Firstly, we must invest in training experts,

employees and developing work conditions. Today, in an information-communication-technological industry, which is everchanging, if you are not a true technological leader, and if you do not have first class experts offering top solutions in addition to product quality, then you will find it difficult to survive. That is why we are constantly investing in new products, solutions, services and know-how. Last year was extremely successful, and was a year of continuous stable business. You are a big exporter to Russia; you have over a third of total Croatian exports to Russia. Could you motivate other Croatian companies and help them enter the Russian market with greater force? Of course, Ericsson Nikola Tesla is an open company. We share our expertise of various markets, especially the demanding ones like the Russia. We exchange information on how to succeed in this market and how we work. We are ready to show other Croatian companies how to work successfully there using the example of 2012. As is recognised, our company has worked intensively in Russia since 1958, and this is our important export market. There have been ups and downs over the years and different challenges, since this is a market that demands constant quality. You have to offer quality products, solutions and services, be

extremely proactive and work long-term. You cannot go to Russia and expect to achieve excellent results after three to six months. You must opt for a strategy for the Russian market and invest in order to succeed. Innovation is a necessity in your industry, not for progress, but for development. Where does Ericsson Nikola Tesla stand in the global Ericsson in terms of innovation? We are recognised for our innovation processes and innovations within the global Ericsson organisation. It is impossible to survive in a global team of 110,000 employees in over 170 countries and continuously be given responsibilities in development and research, in the most demanding projects relating to new solutions and technologies if you are not inventive, and if you are not constantly developing new ideas, products and prototypes. Ericsson Nikola Tesla is recognised within Ericsson for its top innovations; our teams and experts receive global awards. I think innovation is our strongest competitive advantage, not only in terms of working with customers in foreign markets, but also our growth and survival within the global organisation. Education is the foundation of innovation. Ericsson Nikola Tesla has been working with Croatian universities for a long time. What is your opinion of

the quality of individuals coming from Croatian universities? Ericsson Nikola Tesla has been working with universities in Zagreb for many years. This co-operation has been continuous and good. Of course, we are dealing here with technical universities


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( 64%

higher revenue over 2011

nvest during times test

o succeed in this market how we work. We are ready to show other Croatian companies how to work successfully in We want to cheer up shareholders Ericsson Nikola Tesla is popular amongst shareholders since you regularly pay a substantial dividend, which will be the case this year also. Is this your long-term policy? I would not call it a long-term policy. Naturally, the priority for all of us, as well as myself and the Board of the company, is quality and stable longterm business. When I am able to secure long-term stable business in addition to the many investments we must make every year, and when we can cheer up our stockholders, then we will continue to do so in the future. our experts who are lecturers at universities, while the students learn from them using state-ofthe-art technologies. Every year, for the past 11 years, we organise Open Door Days. In 2012, 67 top students from FER and FSB as well as other regional universities visited our company. They spent two months with us, working on innovation projects and they got to know our organisation structure as well as working with their mentors. This was an opportunity for us to meet quality young people who recognise this company as the company of

We will continue to work in Russia market, but I do not expect large individual contracts since this is our area of expertise, primarily the Faculty of Electrical Engineering and Computing (FER). Over 90% of our employees come from FER or the Faculty of Mechanical Engineering and Naval Architecture (FSB) in Split, where we have a

team of 300 experts working on development-research projects. It is in our interest to constantly develop our co-operation and partnership with these universities. We are always searching for different methods of work. For example, one model is based on

their choice, and who we recognise as part of our team. We are also working on projects related to our activities, and important for universities. We are also participating in various projects funded by the Seventh Framework Programme of the EU. Overall, our co-operation

is good, but its quality depends on both sides. We feel we are responsible for adapting the universities to the demands of the market we work in. I think we managed to build a partnership that is heading in the right direction. It is unrealistic to expect you will sign such a large contract as that which you concluded last year. What are your expectations for 2013? Will you be able to maintain the achieved level of revenue or is it more realistic to expect a fall in relation to the results from 2012. I agree. It is not realistic to expect a large single contract with a customer every year. If we view the past, when Vipnet arrived in Croatia as a new operator, investment was initially high. The same thing happened with Tele2 in Croatia and Ipkom in Kosovo. We will continue to work in the large Russian market, but I do not expect such big contracts. However, I must say our business has been stable for many years, not only during 2012, and we have built a strong foundation for ongoing work in 2013.


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Privredni vjesnik Year VI No 224

( €16.69 billion

( €7.84 billion

retail loans at the end of January

housing loans

20 RECOMMENDATIONS BY PRESIDENT IVO JOSIPOVIĆ TO RELIEVE DEBTOR PROBLEMS

Economic growth the only exit for the over-indebted Around 250,000 individuals with frozen accounts with creditors claiming around €2.38 billion. According to data provided by the Croatian Chamber of Economy, the number of property foreclosures rose from 1,058 family houses and 238 apartments in 2009 to reach 1,715 foreclosures on family houses and 620 apartments in 2012 Igor Vukić he introduction of personal bankruptcy in the near term, amendments to the Foreclosure Law in terms of abolition of foreclosure on debts below €660 and the abolition of foreclosure enforcement on residential properties were merely several of the recommendations proposed by Ivo Josipović, President of Croatia aimed at overcoming the problems of over-indebted citizens. Josipović presented them during a joint session of the Social Justice Council and Economic Council covering the topic of Poverty and citizens debt crisis. During his introductory speech, the President reiterated that total retail loans stood at €16.69 billion at the end of January, housing loans accounted for €7.84 billion. Non-performing loans or partially irretrievable loans stand at around €1.56 billion.

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Non-performing housing loans stand at around €0.5 billion, with non-purpose and other types of loans account for the remaining €0.97 billion. Around 250,000 private individual accounts have been frozen, with creditors claiming around €2.38 billion. An excessive number of foreclosures According to data provided by the Croatian Chamber of Economy, the number of foreclosures on property rose from 1,058 family houses and 238 apartments in 2009 to reach 1,715 foreclosures on family houses and 620 apartments in 2012. President Josipović will submit his 20 recommendations to tackle debtor problems to the government and Parliament for deliberation, and as an incentive to propose bills. Milanka Opačić, Minister of Social Welfare Policy, announced that the recommendations would

be considered in an attempt to effectively prepare a new strategy to tackle poverty. The government has implemented several measures so far. According to the Ordinance, foreclosure through Fina cannot be enforced on debtors’ total monthly salary. The economic crisis has severely affected the elderly and children – around 3,500 children

live in families whose income currently ranks far below the poverty threshold, pointed out Minister Opačić. Boris Lalovac, Deputy Minister of Finance, explained that the whole country has been enslaved by debt, since interest on the external debt this year was €1.46 billion. Economic recovery is the only exit from the crisis, both for the state and for its people, added Lalovac. Danijel Nestić, Senior Research Associate at the Institute of Economics, emphasised that a large number of over-indebted individuals belong to wealthy upper strata. The poorest families did not take loans, as they were not able to meet the criteria set by the banks. Nevertheless, surprisingly, a new phenomenon of deleveraging has appeared and is widespread as a result of the crisis. Indebtedness is decreasing and savings increasing irrespective of the crisis, due to attempts to reduce consumption.

20 recommendations proposed by President Josipović 1. 2. 3. 4. 5. 6.

Introduction of personal bankruptcy in the near term Foreclosures enforcement on debts over €660 Abolition of foreclosure fees for privately-owned company liabilities below €660 Increase court supervision of foreclosures and fees Accept debt settlement amounting to two thirds of property value Abolition of foreclosure enforcement on residential apartments, according to minimum criteria

7.

8. 9.

10. 11.

Define models according to which a debtor is entitled to remain in a foreclosed apartment as a lessee Re-define the current fiduciary concept, due to its features of usury The Croatian National Bank (HNB) needs to increase its supervision of interest rates on loans Re-define the current default rates,as they are excessively high Interest rates need to be frozen after reaching the principal

12. Banks need to write off

13. 14. 15. 16. 17.

debts of the most vulnerable and implement loan reprogramming Moratorium on loan payment in accordance with debtor’s economic capacity Convert Swiss Franc-pegged loans into loans in Euros or local currency Staff claiming salary by foreclosure to be given priority Improve the provision of financial information to people Encourage social entrepreneurship

18. Provide public services at 19. 20.

affordable rates for the most vulnerable social groups Banking sector to provide service programmes to assist in deleveraging To encourage prosperous companies and individuals to set up funds for social projects


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( 18% unemployment rate ( 2% drop projected for 2014

in GDP in 2013

MACROECONOMIC PROJECTIONS BY HYPO BANK

Downward trends continue Positive developments in exports: with the exception of shipbuilding and exports by companies whose operations were halted or undergoing restructuring, exports saw high double-digit growth during 2012 preparation of labour market reform is significant, as well as further rationalisation at collective bargaining level. Nevertheless, such reforms are not likely to cause a rapid U-turn in the labour market against the backdrop of a further contraction of demand. Positive developments are possible in exports: with the exception of shipbuilding and exports from companies whose operations were halted or undergoing restructuring, exports saw high double-digit growth in 2012. However, Stojić anticipates a slight drop in exports as a result of weakening foreign demand, issues concerning competitiveness following Croatian EU accession, as well as the increase in export costs to CEFTA member countries. Nevertheless, a trade deficit in goods is anticipated to reach around 15% of GDP.

Drago Živković his year will resemble 2012, according to the latest projections by Macroeconomic Outlook, the semiannual publication from Hypo Alpe-Adria Bank. It yet again implies a drop in GDP of 2%, with projections of meagre growth of 0.3% only in 2014. The good news is that inflation is anticipated to remain low, although more bad news is for a further increase in unemployment from the current 15.8% to 18% in 2014.

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Immediate reforms imperative Hrvoje Stojić, Director of Economic Research Department at Hypo Alpe-Adria Bank, believes pessimistic forecasts for GDP are based on deleveraging in the private sector, increasing unemployment and grim prospects for the economic environment. Credit activity will be restricted by uncertain outcomes of prebankruptcy settlements, increasing costs of financing following the credit rating downgrade, as well as an anticipated increase in regulatory rigidity in the banking sector. Personal consumption will be negatively affected by the unavoidable reforms of social transfers, labour market and the public sector, which will result in a drop in disposable income and employment. According to Stojić, any investment revival is not to be expected prior to the second half of 2013 or the beginning of 2014, within the demanding requirements for the implementation of a large number of capital-intensive projects.

World in a liquidity trap The global economy has been stagnating and is in a liquidity trap, which implies the existence of funds within the financial system, yet a slow turnover due to deleveraging of banks and risk avoidance, stated Neil MacKinnon, Global Macro Strategist at the investment fund VTB Capital. Rapid turnover of funds requires a substantial increase in investor confidence that normally is the result of a slow and tedious process. According to MacKinnon, the US will be the first to exit from crisis and see a phase of long-term sustainable growth, whereas the Eurozone will lag behind until it has given up its obsession with belt-tightening measures. Germany is the single largest obstacle, refusing to share its trade surplus with the south of Europe where German banks generated substantial profits until four years ago. German exports to Eurozone countries are currently stagnating, whilst it is rising in Russia and China. “It might be a desirable option for Germany to exit the Eurozone and create a monetary union with Russia and China”, sarcastically proposed MacKinnon. Pessimistic projections could be improved by reforms implemented immediately, yet in the wake of local elections it is not realistic for this to occur in the very near

term. The second half of 2013 is more likely to see reforms, although their impact will not be felt prior to the next election cycle in two years. Stojić believes

In the red with the EU Croatia is likely to achieve a balance of payments surplus over the next two years, due to a stable increase in tourist inflows and a gradual inflow of EU funds. Nevertheless, Stojić anticipates Croatian payments to the EU budget are likely to exceed her withdrawals over the first years of her membership, as was the case with several other members, such as Slovakia. Croatia is prone to a continuance of borrowing on global markets at relatively affordable rates, since the credit rating downgrade has been overlooked due to a global appetite for risk. This will assist to preserve foreign reserves and local currency stability and hence monetary policy will see no significant changes.


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Privredni vjesnik Year VI No 224

TRADING EVALUATION FOR JANUARY

Deficit increased to €523 million Anticipation in the growth of nett exports based on the change of focus of domestic companies towards export markets, the advantages of the Single European Market, as well as an increase in tourism, according to RBA analysts ccording to the latest data provided by the Croatian Bureau of Statistics, the trade balance of goods worsened in January over December, with exports contracting and imports rising. The unfavourable trends from December 2012 continued in January 2013. Exports in January stood at €606 million, 9.1% down over January 2012, whilst imports at €1.13 billion, showing an annual growth of 1.8%. The trade deficit rose to €523 million and the import/export ratio dropped to 53.7%. According to the categories of the National Classification of Economic Activities, the most significant negative impact was due to a substantial decrease in exports of production of other means of transport (shipbuilding). If this category is excluded from total

of focus by domestic companies towards foreign markets, the advantages of the Single European Market, as well as on an increase

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Imports of goods in 2013 will be adversely affected by weak domestic demand exports, the annual drop in exports then stands at 2.8%. Exports drop due to shipbuilding Shipbuilding used to be one of the principal export sectors for Croatia and restructuring and production contraction have negatively influenced the total value of such exports. Shipbuilding and food processing have both seen a significant fall-off in exports,

with the latter currently standing at -20.2%. On the other hand, exports of production of basic pharmaceuticals and pharmaceutical substances rose (15.7%), the production of finished material products, with the exception of machinery and equipment (22.1%), and in the production of computers and electronic and optical products (20.8%). According to RBA analysts, anticipation of growth throughout 2013 is based on a shift

in tourism. Nevertheless, due to the structural rigidity of exports and restructuring in several sectors, the anticipated economic slowdown in principal export markets (Italy, Slovenia), as well as likely negative consequences of leaving CEFTA will certainly adversely affect exports and hence slow any economic recovery in Croatia yet again. Moreover, imports of goods will be negatively affected by weak domestic demand.

INDUSTRIAL PRODUCTION

RETAIL TRADE

Annual growth of 3.4%

Eleven months of negative trends

According to the latest data provided by the Croatian Bureau of Statistics, industrial production in January saw an unexpected year-on-year growth of 3.4%. The relatively high growth rate is almost certainly the result of the impact of the low base period and/ or the continuous drop in industrial production over the previous months, as well as a double-digit figure of the stock of completed products during 2012 overall. In accordance with the MIG (Main Industrial Groupings) and National Classification of Economic Activities, the categories that saw a substantial decrease in January 2012, showed growth this year. The production of durable consumer goods rose by 2.8% year-on-year, (January 2012 saw a 9.4% drop). Non-durable consumer goods production increased by 6.9%, (a decreased of 2.8% in January 2012). In addition, energy production was up 4.5%, (in January 2012 it plunged by 14.9%). According to MIG, the processing

According to preliminary data on retail trade volume for January 2013, provided by the Croatian Bureau of Statistics, retail trade showed a absolute contraction of 5.3% according to the fixed base index in relation to January 2012, continuing the negative retail trade trends for the 11th consecutive month. Nominally, retail trade showed negative annual rates, as the nominal decrease in January was 0.8%. A significant decrease in January is customary, following a surge in December consumption. According to fixed base indices, retail trade plunged by 21.6% in January compared with December in real terms, or by 21.7% n o m i n a l l y. Nevertheless, according to seasonally adjusted indices, where the seasonal component has been excluded, re-

industry showed an annualised growth of 2%, (a drop of 4.7% during the base month), whilst electricity, gas and vapour delivery indicated relatively high growth of 11.6% (slumping by 14.5% during the base month). The positive annual growth rate certainly is a positive move forward following relatively high falls over the whole of 2012 (with the exception of August). Nevertheless, the results for the forthcoming several months will need to be carefully considered. In accordance with the seasonalised, smoothed monthly indices, industrial production grew by 2.3%, due to an increase in the production of capital goods (4.7%), durable consumer goods (6.4%), as well as non-durable consumer goods (8.4%).

tail trade showed real growth of 0.3% over December. Unfavourable movements in the labour market or increasing unemployment and the absolute decrease in average income, as well as uncertainty and pessimistic projections concerning income over the near term have adversely affected consumption and hence retail trade. Irrespective of the fact that indices of consumer confidence, expectations and sentiment provided by the Croatian National Bank (HNB) have improved slightly in January compared with December, they are still currently far from optimistic. Considering the low base of 2012, we are anticipating slightly more favourable trends. Nevertheless, the long-term recession and uncertainty has exhausted the general public and we do not anticipate any recovery during the whole of 2013, suggest RBA analysts.


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( €4.19 billion

level of corporate debt in the economic sector

Financial Agency

Blocked companies owe €5.33 billion Of all long-standing blocked companies, 17,324 have no employees and owe €2.15 billion; of all long-standing blocked private individual companies, 17,290 have no employees, and their total debt is €0.59 billion ue to defaulting on payments, 65,504 organisations were frozen as at 31st January 2013, which is 1,880 fewer than in December 2012. Uncollected, but due debts of organisations totalled €5.33 billion, which is 5.8% less than at the end of December 2012, according to data provided by the Financial Agency. Concerning private individuals, 249,029 were blocked at the end of January; they owed €2.4 billion up 1.6% over December 2012.

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Long-standing blocked accounts Concerning insolvency, according to the duration of the block, organisations with long-standing blocked accounts dominated according to number and amount. In relation to December 2012, there were slightly fewer insolvent companies blocked over 360 days, and the amount of their debt was also lower: 3.2% down. The number of insolvent organisations having short-term blocked accounts was 7% lower compared with December, with their outstanding debt being 14.4% lower. There were 4,289 companies blocked up to 60 days, down 321 than in December. Their outstanding debt decreased by €17.25 million. It must be noted that over three quarters of companies blocked for over 360 days, with their debt accounting for 84.8% of total debt. Concerning those blocked for over a year, the majority have been blocked for five or more years (31.4%). Insolvencies, based on

the duration of the block and type of organisation, companies and private individuals, companies and private individuals blocked for 360 days or more, dominate. Almost two thirds of all economic operators (42,763)

At the end of January there were 249,029 private individuals who owed €2.4 billion relate to those without employees. The amount due but outstanding debt is 57.8% of overall total debt. Of 65,504 blocked companies, slightly less than a half relate to private individuals with 79.4% of total outstanding debt. The least amount of registered, due and outstanding debt of insolvent companies (31-60 days) stands at €30.23 million, and the highest amount relates to companies blocked for over 360 days (€3.52 billion). Economic sector dominates Of the 31,209 blocked companies, 29,725 (95.2%) relate to companies within the economic sector (trade companies, banks, insurance companies, leasing companies, co-operatives, foreign founders, investment companies, credit unions and joint financial institutions). A total of €4.19 billion (99%) of outstanding debt refers to companies within the economic sector, with €41.45 mil-

lion (1%) relating to those outside the economic sector (institutions, non-profit organisations, local administrations and political parties). A large proportion of companies (75.8% or 17,324) with long-standing blocked accounts, comprise of companies without employees. Their debt totals €2.15 billion. Private individuals blocked for over a year represent 80% of the total number of blocked private individual accounts. The least amount of registered, due and outstanding debt of insolvent private individuals (up to 30days) totals €4.95 million, and the highest amount by private individuals blocked over 360 days (€1 billion). With long-standing blocked private individual companies, 63% or 17,290 have no employees, and their total debt is €0.59 billion.


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Privredni vjesnik Year VI No 224

ZAGREB AIRPORT

Financing soon to be completed with work scheduled for September Minister Hajdaš Dončić says the achievement of this huge project confirms Croatia is a safe country for foreign investment Drago Živković hen the concession contract for the construction and management of Zagreb Airport was signed on 11 April 2012, Bouygues Development Director, Christophe Petit said the work could start in six to nine months. A year later, Petit announced the work could start in September 2013, 17 months after the signing of the contract. Nevertheless, Petit does not see

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It takes around 18 months to complete the financing process for similar projects in Europe this as a delay since, as he says, it takes around 18 months to complete the financing process for similar projects in Europe. However, the financing is not yet complete, even though Petit says they are very close to their goal, and everything will be concluded

in early April. In the meantime, the shareholders structure has changed, and ZAIC is no longer the concessionaire, but a newly formed joint-stock company Zagreb International Airport (MZLZ). ZAIC is registered in Great Britain as a company, in which Bouygues holds 85% ownership. The remaining 15% is owned by their project partner, Aeroport de Paris-Management (ADPM), a company that manages two Paris airports. The concession holder will be MZLZ, which will be supervised by Zagreb Air-

port in majority ownership of the state, said Minister Siniša Hajdaš Dončić. Five percent to Viadukt In addition to Bouygues and ADPM, International Financing Corporation (IFC), part of the World Bank, owns 20% of MZLZ, with Croatia osiguranje owning 10%, and Viadukt (5%) as the head contractor. According to Board President, Joško Mikulić, Viadukt will execute all infrastructure work on the roads and runways, worth around €50

million. MZLZ’s shareholders have organised €90-€95 million, and intend to take out a loan for the remaining €236 million, the value of the new terminal. The European Investment Bank has already approved €120 million, and they also count on two loans (€65 million each) from Zagrebačka banka and Erste banka. Petit says ZAIC and MZLZ have so far invested €4 million in documentation drafting; the location permit was issued at the end of the last year; the main project is in preparation, and the construction permit is expected to be issued in April. ADPM’s four employees are already preparing the takeover of Zagreb Airport. The employees’ jobs are guaranteed to remain under the same conditions for at least five years, points out ADPM Project Manager Arnaud Sabatier. The new deadline for the construction of the terminal is April 2016, and the finalisation of this huge project confirms Croatia as a safe country for foreign investment, says Hajdaš Dončić.

CROATIAN NATIONAL BANK

Gross foreign debt reaches €45.3 billion According to data provided by the Croatian National Bank, gross foreign debt totalled €45.3 billion at the end of November 2012, €174 million up compared with the end of October. This result was contributed to mainly by the higher public sector debt, or public companies to be more specific. Foreign debt continues its decline on a yearon-year basis; in relation to November 2011, it decreased by €1.1 billion or 2.5%. This decrease is the result of the financial sector’s debt clearance, which managed to reduce by over €2 billion

during that period (-13.3%). The foreign debt of the financial sector stood at €13.4 billion at the end of November, where €9.6 billion relates to bank debt. The growth of foreign debt on a year-on-year basis was mainly influenced by the public sector - that is, the state - whose foreign debt totalled €8.3 billion. With the issuing of the Eurobond ($1.5 billion) in April, the state additionally increased its debt during that period by taking over foreign claims from the shipyards, which is an integral part of their restructuring programme. By November 2012, public companies had mainly reduced their

foreign debt and a decreased total debt on an annualised basis. The foreign debt of private companies is stagnating. With a €115 billion increase in November, it reached €11 billion, only €491 million more than in November 2011. However, the majority of this growth is through one company that issued a €300 million bond. This year, we are anticipating foreign debt to stagnate, considering a weak economic recovery. With a mild nominal growth in GDP, the percentage of foreign debt in GDP could decrease below 100%, according to RBA analysts.


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CROATIAN-GERMAN BUSINESS FORUM

THE CUSTOMS UNION OF RUSSIA, KAZAKHSTAN AND BELARUS

Russians spend lavishly but selectively

Germany aiming to strengthen Croatian industry Igor Vukić roatian EU accession needs to have a significant impact in improving competitiveness, as well as on the increase and promotion of investment for which there is substantial interest in Germany, stated Philipp Rösler, German Vice Chancellor and Minister of Economy, during the CroatianGerman Business Forum held recently in the Croatian Chamber of Economy. Rösler added that legal, safety and investment safety strategies, as well as a more flexible labour market, are fundamental for German investors in Croatia. Moreover, Germany is aiming to strengthen Croatian industry. According to previous proposals, experts from the German Fraunhofer Institute will participate in the creation of a development strategy for Croatian industry. According to the Croatian Economy Minister, Ivan Vrdoljak, projects such as an expansion of co-operation between Končar and Siemens were also discussed. The two companies will make a joint application for the Croatian Railways (HŽ) tender covering new trains. The German participants at the Forum showed particular interest in several other traffic and energy sector projects. Vrdoljak pointed out that German companies have so far contributed significantly to Croatian economic development, by introducing new technologies and making significant innovations during their co-operation with, or takeover of, Croatian compa-

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nies. Similar partnerships will be strenuously encouraged in the future. Exchange of knowledge and skills imperative Co-operation in the educational system was also discussed during the Forum in order to foster the exchange of knowledge and skills that has already been achieved many times thus far through a vast array of twinning projects, implemented with the committed participation of German experts. Germany is the second most important economic partner of Croatia and the third in terms of investment. However, investment potential substantially exceeds the €3 billion invested in Croatian economy, emphasised Nadan Vidošević, President of the Croatian Chamber of Economy (HGK). He invited German partners to launch new investment in the production sector, which has always had an extremely positive impact on Croatian exports. Croatia used to be one of the leading transitional countries in attracting investment prior to the crisis, yet these were primarily takeovers of existing companies and their markets, stated Vidošević. Germany could greatly assist the Croatian food processing industry by encouraging its retail chains to sell Croatian products. This industry is likely to be severely affected by leaving CEFTA and the substantial losses, which will have serious consequences for subcontractors in the country, could be greatly alleviated by support provided by German partners, stressed the President of the Croatian Chamber of Economy.

It is not a problem to sell products to Russia, yet they need to be of top quality and at moderate prices, which is extremely difficult to achieve primarily in the case of those countries subject to customs duty with Russia. The prices which are 30% higher as a result of VAT and customs duty are also raised as a result of distributor and trade margins which can run up to 200%. Consequently, the price of 0.7 litre bottle of Pelješac Plavac wine sold at €11 in Croatia will range between €20 and €27 in Russia. In some cases, this will stores soar as high as €127, as stated during a recently held seminar at the Croatian Chamber of Economy where senior officials from the Moscow-based company CustomRus outlined the subtleties of business activity in the Customs Union of Russia, Kazakhstan and Belarus. Market research is fundamental, as well as the identification of niche markets, according to Tatjana Koldašova, a representative from CustomRus. She believes that Croatian organic food products have immense potential, as

well as strong alcoholic drinks and children’s clothing. The Croatian Chamber of Economy and its Moscow-based representative office can provide comprehensive information on these aspects. The Croatian Chamber of Economy also covers the Business Council for Co-operation with Russia that has recently achieved significant results, pointed out Vesna Trnokop-Tanta, Vice President of the Croatian Chamber of Economy. Croatian exports to Russia surged by 40% in 2012, reaching $420 million. Work contracted by the Zagreb-based Ericsson Nikola Tesla significantly accounted for export growth, with a large number of smaller companies also achieving excellent export results. In February the Samoborbased company, DIV, signed a five-year contract for the export of screws. (I.V.)

CROATIAN BUSINESSMEN MEET WITH PRESIDENT ILHAN ALIYEV

Azerbaijan market penetration Representatives of some thirty Croatian companies have recently participated with a meeting with Ilhan Aliyev, President of Azerbaijan during his two-day visit to Croatia. Aliyev showed considerable surprise at the level of interest in business activity in his country and the wide understanding on her market. “President Aliyev stated that he was expecting only an informative discussion but it turned out to be an operative meeting instead”, stated Nadan Vidošević, President of the Croatian Chamber of Economy. Representatives from Končar, Ledo, Geofoto, Bruketa & Žinić Advertising Agency, Viadukt and Uljanik, to name a few, also participated at the meeting. Plinacro and the Azerbaijani oil and gas company SOCAR signed a co-operation agreement on the Ionian-Adriatic gas pipeline

project. Azerbaijan is a country with abundant gas resources and this pipeline project will enable the annual delivery of around 10 billion cubic metres of gas to Europe. Currently some 25% of Croatian oil imports are from Azerbaijan. The Rijeka-based JGL company has been present in the Azerbaijani market for a long time and the Bruketa & Žinić Advertising Agency branch office has been there for four years. “We can express our utmost satisfaction with our business activity in Azerbaijan. The country has been developing rapidly and business activity there is excellent”, stated Davor Bruketa. His agency has been co-operating with the telecommunication company Nar after winning an international tender. Geofoto is expecting to conclude a contract worth €99 million for military cartographic development. (I.V.)


10

Privredni vjesnik Year VI No 224

( 15,000 companies operating in construction this year

GREEN RE-CONSTRUCTION OF EXISTING BUILDINGS

Green construction without an alternative When Croatia joins the EU, buildings without an energy certificate will not be for sale or rent according to the law. However, the other question is its implementation and control of certification ings. As with the new ones, these buildings are also subject to certain European directives and local legislation. Energy inspection should be performed and they should be certified. This is the law. However, the second question is its implementation and control of certification, Hrs Borković warns.

Boris Odorčić reen construction and sustainable development represent a chance for energy efficiency development and the preservation of natural resources. Furthermore, for companies that opt for the green economy, green construction could be a solid source of income. However, Croatian construction is experiencing difficult times, says Vedran Vilović from the Sector of Construction and Utility services within the Croatian Chamber of Economy. During the golden years, for example 2008, the value of construction work totalled €0.63 billion and there were 11,200 companies with 108,000 employees operating in the sector. Three years later, the value of work plummeted to €0.37 billion with 15,000 registered companies in 2011, but with fewer employees (around 83,000). Almost 42% of these companies had between one and eight employees, which indicates they were mainly craft companies. Only 1% of construction companies had over 500 employees, Vilović notes, adding that the number of issued construction permits is also in decline.

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Inspection and certification Regardless of this downward trend, changes in approach and construction methods are needed. Therefore, I believe Croatia will recognise ‘green construction’ as something that could save energy and does not have an alternative in the future.

Otherwise, the European Union will force it through regulations, Vilović pointed out at the 11th symposium on green construction Green Construction of Existing Buildings, organised by the Green Building Council and the CCE. It should be stressed that buildings are the largest consumers, with 44% of total consumed energy in Croatia. New buildings have a better energy basis than those built between 1945 and 1990, which could be a ‘treasure’

for those companies that would renovate them in compliance with the ESCO (Energy Service Company) model. Therefore, investment in renovation will return through expenditure cuts to companies that actually offer energy services. Željka Hrs Borković, board member of Planetaris, a company that develops integral solutions for buildings, highlights the sector should focus more on existing buildings since there is less investment into new build-

Incomplete data In addition to a few private investors who recognised the advantage of fitting energy efficient construction material and products, the state could also cut expenditure since it owns property in the public sector. According to some estimates, there is a potential saving of around €66.7 million annually by raising the level of energy efficiency in these buildings. Hence why the Centre for Monitoring Business Activities in the Energy Sector and Investments (CEI) started a programme for energy renovation of buildings owned by the public sector. Ivan Šerić, from CEI, says there is slightly less than 190 million m2, some 5% of the total commercial residential sector in Croatia. Among other problems that make it difficult to implement energy renovation is the fact that the available data on state assets are contradictory and incomplete. Despite this, 74 buildings of 400 eligible for renovation according to the ESCO model, have documentation ready, which must be additionally checked. However, only 22 buildings are undergoing the procedure of energy renovation.


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( 27.7% annual fall

in level of house building during 2012

Construction in endless crisis

Recovery should start from the foundations, not facades Throughout 2012, a total of 8,330 construction approvals were issued, down 13.2% over 2011. The value of work according to issued approvals decreased by 12.7% and house building has halved since 2009 Drago Živković osip Švenda, Board President of TEAM from Čakovec, has worked in construction for 35 years, and this is the third crisis he has experienced. According to Švenda, this is also the deepest. “At the moment we are nearing a 50% decrease in the volume of construction work. There is not enough work locally; work is performed below an economic price, and we are not prepared or organised to venture onto foreign markets,” Švenda says. His experience is also confirmed by data from the Central Bureau for Statistics. In January 2013, a total of 483 construction approvals were issued, down 18.4% over 2012. During the whole of last year, 8,330 construction approvals were issued, 13.2% down on 2011. The value of work, according to issued approvals, decreased by 12.7% to €2.84 billion. In terms of the type of building, house building has suffered the hardest blow: 9,742 apartments were planned for construction in 2012, 27.7% lower than in 2011.

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Last year less than 2,917 apartments were completed from a total of 4,150, 7% fewer than during the same period of 2011. House building has halved since 2009; there were over 14000 finished and unfinished apartments that year. However, the statistics are not entirely bad. During the last quarter of 2012, the value of new construction orders increased by 17.8% in relation to the same period of 2011. However, this is only a seasonal anomaly according to movements during the first quarter of that year, during which new projects do not start, suggests Švenda. Furthermore, even though the number of orders is rising, this can only revive the construction if the work is done at a price that brings in the most for the invested money, warns Arsen Brnelić, President of the Professional Association of Civil Engineers with the County Chamber Rijeka and Director of Brnelić gradnja. If, according to current practice of public procurement, the cheapest offer continues to be accepted blindly, which is often not enough to cover the procure-

ment of the required material; construction can only continue to deteriorate, Brnelić says. Accelerated deterioration The fall of the construction sector has continued for decades, but its deterioration has accelerated during the last 20 years, Brnelić reminds. According to data provided by the Central Bureau for Statistics and the Croatian Chamber of Economy, there were 819 construction companies in 1990, of which 114 had over 250 employees. Ten years later there were 4,931 companies, but only 47 of them had over 250 employees. Another ten years later, in 2010, the number of companies increased to 15,483. However, over a half of them (7,801) had not one employee, and only 36 had over 250 employees. For example, in the County of Primorje and Gorski kotar, 82% of construction companies had less than five employees, Brnelić says. Therefore, the construction sector has completely reversed during the past 20 years: the number of large companies plummeted, and an abundance

of small-sized companies were created with the majority of workers employed in the sector. In addition to fragmentation, other problems emerged that continue to aggravate the construction sector. Brnelić says large companies act as if they are ‘cared for by the state’, whilst others are left to fend for themselves and depend on the owner’s ability and resourcefulness. The problem is that there is no healthy competition or rules on the basis of which only the best would thrive. This decreases motivation, and instead of fair criteria in the profession, other skills are developed that in such circumstances are more beneficial to individuals, but do not contribute to the development of construction, points out Brnelić. In order to revive construction, we must start from the foundation, not the façade, Brnelić adds. “Investment is necessary, but first we must set fair rules of the game and create a foundation on which it is possible to sustain and develop; otherwise we will create new bubbles”, Brnelić warns.


12

Priv Privredni vjesnik Year Ye VI No 224

( 12% to 20% increase over 5 years in the level of imported cement

CEMENT FACTORIES ACTIVITY

Construction sector crisis

According to their energy efficiency, Croatian cement factories are currently on par with the European average, although a fu Jozo Vrdoljak ccording to data released by the Croatian Cement Association, the total annual production capacity of Croatian cement producers – CEMEX Croatia, Holcim Croatia and Našice Cement – is estimated at around 3 million tonnes. Last year saw the production of 2.439 million tonnes of cement, 9.5% down compared with 2011. On the other hand, 303,000 tonnes of cement were imported in the first 11 months of 2012 with imported cement accounted for around 20% of total consumption. Total consumption of local and imported cement in 2012 stood at around 1.55 million tonnes, some 230,000 tonnes down over the previous year. Croatia has seen a continuous drop in the share of locally-produced cement with the amount of imported cement increasing from 12% in 2007 to 20% in 2012, primarily imported

A

from Bosnia and Herzegovina, Italy, Hungary and Slovenia. Cement and clinker exports in 2012 stood at 1.184 million tonnes being exported to Albania, Bosnia and Herzegovina, Montenegro, Italy, Hungary, Serbia as well as to certain overseas countries.

The share of locallyproduced cement is dropping continuously whilst that of imported cement rising According to Darko Posavec, Croatian Cement Association Director, 2013 will not see a significant increase in cement consumption. “In addition to the crisis which has severely affected construction, cement producers need to tackle issues of unpaid deliveries, VAT payment on issued and outstanding invoices for deliveries, as well

as a large number of levies such as compensation for CO2 emissions, mining, compensation for water use and for property use, to name but a few, in addition to expensive electricity and gas”, pointed out Darko Posavec. CO2 emissions trading During the period 2013 to 2020, the cement industry has been granted free allowances totalling 766 kilos of CO2 per tonne of clinker produced, in accordance with European legislation. The allowance has been calculated as the average for a number of the most successful and most modern cement factories in the EU and is currently insufficient for most European as well as for all Croatian cement factories; consequently, the remaining required emission allowances will need to be purchased through emissions markets. The quantity will be reconsidered in 2013 and subsequently lowered by 1.43%

MARIO GRASSL, BOARD PRESIDENT OF HOLCIM CROATIA

Innovation-based competitiveness We were the first in Croatia to use specific types of cement for various specific purposes and at the beginning of this year we presented our new product – rolled concrete How successful was 2012 and how are you coping with the crisis? Following 2010 when we ended the year with a loss for the first time, the trend continued in 2011 and 2012. Nevertheless, we operated as a reliable and committed employer in the face of the crisis. We had no lay-offs irrespective of the severe difficulties we faced and salaries have remained unchanged. Our competitiveness has been based on innovation for several years.

What innovative products are we talking about? In 2005, we were the first in Croatia to present several brands of cement and introduced the concept of using specific types of cement for specific purposes. Consequently, we have been introducing new products every year and this year we are presenting an innovative product – rolled concrete. Our competitiveness has been innovation-based and in addition we provide top quality and highly-reliable Croatian products with a Croatian quality label.

What are your expectations in 2013? Holcim will continue operating in compliance with its principles, focusing on its employees, the local communities in which it operates, environmental and nature protection, sustainable development and will continue operating strictly following our customeroriented work policy. We can express our utmost satisfaction with the announcement of a surge in construction investment in the tourism sector and we are hoping the trend will also be followed in others.


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113 3

( around 1.55 million tonnes

total consumption of domestic and imported cement in 2012 2

halving consumption

urther sustainable reduction of CO2 emissions can be achieved solely through the use of alternative fuels and raw materials annually. According to their energy efficiency, Croatian cement factories are currently on par with the European average. Nevertheless, a further sustainable reduction of CO2 emissions can be achieved solely by using alternative fuels and raw materials, which has been thoroughly considered in the study ‘Croatian Cement Industry and Climate Changes’ which also stressed immense potential for the use of alternative fuels and raw materials. “The conclusions of the study have been included in the national strategy on compliance with the obligations under the Kyoto protocol. Nevertheless, the achievements concerning waste collection and management have been insignificant thus far and current Croatian legislation is considerably more restrictive than the European legislation. Meanwhile, Croatian cement factories have obtained the required licences concerning the use of various

materials during the production process, yet the share of alternative fuels and raw materials in the cement industry is currently still significantly below the EU average”, highlighted Posavec. Cement producers CEMEX Croatia is the largest regional construction material producer with an annual production capacity of 2.4 million tonnes. It is the leader in the markets of Croatia, Bosnia and Herzegovina and Montenegro, where it has a substantial logistics capacity. Its principal strength lies in the continuous availability of its 13 terminals for both bulk cement and cement packs to meet the requirements of business. CEMEX comprises three cement factories, six concrete plants and two quarries and currently employs 480 staff. The production capacity of Našice Cement is 1.1 million tonnes. In 2012, it sold around 650,000

tonnes, mainly in Croatia, Bosnia and Herzegovina and Serbia. The recently modernised factory employs 272 staff. It obtained permission from the Ministry of Environmental and Nature Protection for the use of fuels generated from waste in the cement factory. It belongs to the NEXE Group for which a pre-bankruptcy agreement has been filed. Holcim Croatia is part of the Holcim Group, one of the leading producers globally, aggregates (crushed basalt, sand and gravel), concrete and construction services. Holcim Croatia comprises cement factory, two cement terminals, seven concrete factories and three quarries. Its 310 staff operate in 13 locations: Donja Bistra, Jastrebarsko, Karlovac, Koromačno, Kukuljanovo, Lučko, Očura, Plovanija, Resnik, Šumber, Zabok, Zadar and Zagreb. Holcim has been exporting to Bosnia and Herzegovina, Slovenia and Italy for many years.

TRPIMIR RENIĆ, BOARD PRESIDENT, CEMEX CROATIA

Search for new export locations A wide range of infrastructure projects in traffic, the energy sector and environmental protection to be launched What measures have been taken to alleviate the impact of the crisis? The construction industry has been severely affected by the crisis. Consequently, only one of our three factories is currently operating. Nevertheless, this does not imply we are giving up. During the past several years we have been focusing more and more on the promotion of concrete as a sustainable construction material and have made substantial additional efforts to provide new products such as special types of cement and decorative concrete for specific construction requirements. We

have also been working intensively on identifying new export destinations, yet we are continuously facing rising production costs.

them. We support any government initiatives aimed at reviving the economy and attracting foreign investors.

What are your expectations for 2013? Regrettably, I believe we do not anticipate recovery from the crisis in the construction industry through 2013. Moreover, foreign investment is essential for economic recovery. There is a vast array of infrastructure projects in traffic, the energy sector and environmental protection which need to be launched and implemented and we are planning to focus on

How competitive are your products? We hope to increase our competitiveness following Croatian EU accession, as a result of the implementation of the European legal framework and practices in several areas, primarily concerning the use of important alternative fuels in our industry. We are hopeful our state institutions will use their best efforts in creating fair market competition.


14

Privredni vjesnik Year VI No 224

( 70 wine producers In the Mediterra Association

DOMAGOJ NOBILO, OWNER AND DIRECTOR OF MEDITERRA NATURA

Croatian wines penet the Polish market

The company Mediterra Natura is unique both to Croatia and the wider region with one of its principal advantages b anticipates entering the US market and possibly the Chinese market Sanja Plješa he company Mediterra Natura exports and trades in Croatian wines and local delicacies. It is the first Croatian company to have entered the Polish market and several other international markets where Croatian products have not been recognised to date. It organises wine tours throughout Croatian wine regions in co-operation with tourism agencies. In addition to the company Mediterra Natura, there is the Mediterra Association encompassing over 70 of the leading Croatian wine producers, whilst organising wine tasting events and presentations abroad. Privredni vjesnik spoke with Domagoj Nobilo, Director of Mediterra Natura about business plans in the near term.

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What are the principal differences between Mediterra Association and the company Mediterra Natura? Mediterra is the largest regional and Croatian Association bringing together over 70 wine producers and those related to wine production throughout the region. Our principal goal is the promotion of Croatian and regional wines both locally and internationally, the development of wine and food brands, fostering of exports, the enhancement of development of regional cultural and wine tourism, as well as raising customer awareness. In addition, we are striving to strengthen marketing co-operation with

a large number of global wine producers. On the other hand, the company Mediterra Natura is involved in wine exports and hence both the company and the Association operate jointly with the Association organising wine presentations and B2B wine tasting events abroad, whereas Mediterra Natura trades in wines following customer identification. We not are aiming to organise open wine tasting events at wine fairs, as we are primarily striving to organise wine tasting events for potential customers. The Association identifies potential customers and subsequently the company starts exporting the specific wine varieties in which customers are primarily interested. Export and trading of wines are our commercial objectives. Both the company and the Association were founded some three years ago and the number of Association members has risen significantly. We have penetrated several markets where Croatian wines had not been recognised thus far. You have penetrated the Polish market. Are you satisfied with the results achieved in this market so far? Last year, as a result of assistance provided by the Croatian Chamber of Economy, we managed to identify important partners in Poland who have been in the wine business for a long time and are well-informed of the demands in their market. We therefore opted for a joint venture set-up.

The Polish market is extremely interesting, with over 40 million inhabitants, although their wine culture is currently still developing. Nevertheless, Poles are increasingly opting for wine. Poles have also traditionally been amongst Croatian most frequent tourists. That is true. They are well-acquainted with Croatia, primarily Dalmatia, and also with Croatian gastronomic products. They advised me that on their return to Poland, they had often wondered where they could purchase the wines they had tasted. Unfortunately, there have been no distributors of Croatian wines in

Mediterra has been granted rights of exclusive representation of Croatian kosher wines Agrolaguna to the American market Poland. The Poles believe Croatian wines are top quality and with this in mind, we opted to enter their market. The first orders and wine deliveries are about to begin. It should have happened earlier, yet we faced some unexpected problems that we have managed to tackle. We will start by delivering smaller quantities, yet we are hoping for success in Poland in the near term, as we strongly believe in the effectiveness of our business plan.

What other markets are you planning to penetrate in the near term? Mediterra Natura is unique both to Croatia and the wider region, and one of its principal advantages is exports to and the penetration of more distant markets. We currently export to Japan and Sweden and anticipate enter-


www.privredni.hr Business & Finance Monthly

15

( 30,000 litres

annual export capacity per wine producer

trating

being its exports to and penetration of more distant markets. It currently exports to Japan and Sweden and rently negotiating with several American distributors regarding the trading of Croatian wines and have thus far signed three preliminary contracts – with Barclays Wine Group, Alpine Selection and MMA Primera Int. Trading Services Inc. Nevertheless, it has to be said that such partnerships cannot be formed overnight. They are a result of a large number of wine tasting events throughout towns and cities, and many meetings with potential clients and business partners. Nevertheless, the foundation of additional joint ventures in the markets we have already penetrated will be helped considerably. We are striving to create at least one joint venture company on a new market every year.

ing the US market and perhaps even the Chinese market. This implies huge investment in staff as well as huge financial investment and we have so far relied exclusively on our own capital. We believe state institutions need to monitor and assist companies with innovative ideas and effective business plans. Wine is an

original product and does not require large incentives for its export. There is potential for the foundation of joint ventures in Japan, the US and China. It has to be said that Mediterra has been granted exclusive representation rights of Croatian kosher wines (Agrolaguna) on the American market. In addition, we are cur-

Are the quantities of Croatian wines sufficient to meet the requirements of Japanese or Chinese markets? Considering Croatian producers’ differentiation, ranging from small to large producers, and keeping in mind that the annual export capacity of each wine producer stands at around 30,000 litres, we are aware it is not sufficient to meet the requirements of Japanese or Chinese markets and therefore we cannot compete with the large global exporters such as Chile, Argentina, Australia or New Zealand. Interestingly, China is starting to invest in large vineyards, which indicates the likelihood of the appearance of some new large wine producers. In my opinion, our future lies in producer co-operatives and

monocultures, implying the idea to start producing monocultures of, for example, Malvasia wine, over several thousand hectares in various parts of Croatia, such

Croatian wines are expensive although certain customers have recognised their quality as Istria. Consequently, production costs would be substantially lower with final prices both much more acceptable and more competitive. Subsequently, Croatian producers would be able to begin exporting to more distant markets. Nevertheless, the issue of who will be the principal promoter of these co-operatives and such projects is still to be tackled, as well as in what manner a similar stance amongst Croatian wine producers will be promoted. Wine producers are prone to protecting their own brands and not inclined to give up their own labels, which in this case would be an imperative. In order to increase exports, we need to lower wine prices. This cannot be achieved with top quality wines, yet it could be achieved in the case of high quality wines. The involvement of the state is imperative in order to tackle the issue at a national level. Croatian wines are expensive although certain customers have recognised their quality. However, cheap wine is currently more often opted for than those traded at â‚Ź10 or more.


16

Pr Privredni vjesnik Year Y VI No 224

( €5 billion

value of the Dubrovnik Pearl Zone project

( €920 million

first phase construction tion cost

NEW TOURIST RESORTS

Dubrovnik Pearl soon to sparkle The tourist resort will be located in the area called Tri sestrice (Three sisters), 27 kilometres metres north of Dubrovnik, D bro nik between Slano and Ston, covering 5,000 hectares Sanja Plješa ollowing a multi-year standstill of construction work due to administrative and investment issues, it now seems that the construction of the tourist resort Croatian Dream, one of the largest European construction projects, will finally start; the idea behind the project originated some ten years ago. It will be located in an area called Tri sestrice or Tri uvale (Three sisters or Three bays), 27 kilometres north of Dubrovnik, between Slano and Ston. The tourist resort - called Croatian Dream or Dubrovnik Pearl Zone - will cover 5,000 hectares and the total value of the investment is €5 billion. Several reputable international architects have participated in creating the project, provid-

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ing the ideas behind the entirely new five-star tourist resort which comprises of seven hotels, 221 villas, 500 suites, several golf courses covering 208 hectares, a mega-marina on 12 hectares, a film studio, an airport for business flights, a business zone and a wide array of sports and entertainment programmes. The most recognised global tourism brands “The resort has been designed to resemble similar projects in Dubai. Nevertheless, we faced many hurdles during its implementation, as a result of a large number of administrative issues. The land purchase took seven years, as we needed to trace the heirs of all the fragmented land. We have now obtained all the required permits and selected several investors from the

USA, Hong Kong and Singapore”, stated Vicenco Blagaić, owner of Profectus Group who provided the idea behind the project, adding that the first construction phase is about to commence. Land sub-division will be implemented by the end of the year and the construction of the required infrastructure will begin. The first aspect of the tourist resort will cover an area of around 40 hectares and the construction cost will be €920

million. It is anticipated that the first construction phase will be completed in three years. “Dubrovnik Pearl Zone will feature some of the most wellknown global tourism brands. Moreover, we have signed agreements for the takeover of seven hotels in the resort. In addition to classical holiday tourism programmes and organisation of a wide range of events, the resort will provide conference facilities, as well as health and sports and sports medicine programmes”, emphasised Blagaić. Furthermore, the new tourist destination will have a highly positive impact on the development of agriculture and on the production of organic food so that hotels and restaurants in the resort may provide Croatian dishes made from local ingredients.

TOURISM WITHOUT OBSTACLES

One more step forward In line with the programme Tourism without obstacles, that has been implemented by the Ministry of Tourism for several years, a documentary film with the same title has been recently promoted The director of the film is Nikola Jurić and the film was made in association with the Ministry of Tourism, Ministry of Health, Croatian Employers’ Association in Hospitality and Croatian Tourism Board, with financial assistance being provided by many counties, cities, tourist boards and companies The purpose of the film is to draw attention to

the level of evolution that has been reached in Croatia in terms of providing care for all categories of disabled. Much has been done to date to enable disabled people an easier and more comfortable movement. Many barriers have been removed from roads and walks, entrances, rooms, hotels, restaurants, parks, wellness centres and pools, Jurić noted. Regarding the importance of the film, Mirjana Dobranović, President of the Association for the Promotion of Equal Opportunities (UPIM), said that only 0.08% of disabled in Croatia use various tourist and

other capacities adapted for them. The purpose of the film is to open doors for disabled in tourism, and vice versa. European countries have recently turned their attention to the disabled. Spain used

Around 160 million disabled travel globally funding from EU funds to adapt its hotels, thereby attracting more disabled people. The Spaniards realised such people play a role in improving tourism results since they travel with families

or escorts, pointed out Mirjana Dobranović. According to statistics, some 160 million disabled people travel globally and in order to attract more disabled people, the film will be distributed at tourism shows around the world, and the Croatian Tourist Board will promote it on Facebook and Twitter. (S.P.)


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