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may 3rd - may 16th


the industry  /  The Effect of Croatia’s EU Membership on the B&H Economy financial  /  The Curious Case of the Serbian Dinar   /  Eurozone Financial Services: Short-Term Bruises or Long-Term Prospects?

southeast europe · a fortnight in review no.06 / subscription only / 2nd may 2012

feature interview  /  Afternoon High Tea with H.E. Michael Davenport

weathering it away


may 3rd - may 16th



may 3rd - may 16th



The Embassy of Sweden and the Swedish Trade Council, with the support of the Croatian Ministry of Economy, Croatian Chamber of Economy as well as the Croatian Employers Association; are organizing a high-level INVESTMENT SUMMIT at Westin Zagreb on Wednesday, 9 May. The Summit will bring together project owners, international project financiers and turnkey suppliers in the sectors of water, waste, renewable energy and infrastructure. The aim is to present innovative ways of project financing and give impetus to how these could contribute to the development of more projects. ISC-SEE2012 is an exclusive opportunity for Croatian project owners to present their projects to foreign companies and financiers with interest in the region in general and Croatia in particular. International project financiers at the Summit will include Macquarie Capital, Ener-Cap Capital Partners, Crescent Capital and Finance in Motion as well as EBRD, EIB and IFC. The Summit is sponsored by Erste Bank, Bombardier, Ericsson Nikola Tesla, Scania, Kapsch Trafficom, CMS Reich-Rohrwig Hainz, Saab and the Swedish Export Credit Agency. Additional confirmed international private sector participants include Vattenfall, Atlas Copco and Alfa Laval. Register your participation NOW on the ISC-SEE2012 website,

may 3rd - may 16th



introductory epistle

Weathering It Away


fortnightly news


The Economy


Of General Interest


the indusry

The Effect of Croatia’s EU Membership on the B&H Economy




The Curious Case of the Serbian Dinar


Crunch Time for Slovenian Banks


Eurozone Financial Services and Business: Short-Term Bruises or Long-Term Prospects?


feature interview


Afternoon High Tea with H.E. Michael Davenport


social economics

NARR: Find a Partner, Improve Your Lot


event horizon

Croatian Democratic Union's Slush, Slush & Away 30


in medias res

Macedonian Ethnic Tensions: or Beyond Good and Evil



Ohrid: Blue Pearl of the Balkans 38


good stuff

Must-Bring-Back from Serbia


to do list



may 3rd - may 16th


introductory epistle

Weathering It Away


he title of this introductory epistle is absolutely intentional, and the author will admit from the get-go that he did his best so as to combine the commonplaces “weathering the storm” and “wishing it away” into one semantic unit. For that is precisely what has been going on in this region over this past fortnight. Take, for instance, Serbia, perhaps the best example of all. They are nominally weathering the storm brought about by the depreciation of the Dinar, but, given that the elections are mere days away, they have sooner been wishing it away: both the incumbents and contenders, mind, for this problem will not go away – unless, of course, quality measures are taken. Bosnia is no different: the bogeyman of the day is Croatia’s impending entry into the eu, and how that might affect Bosnian exports. Everyone’s up at arms, but the Government does not seem to have a clear strategy. I shall be a bit cynical and go one step further: it is also not clear what it is exactly that they are wishing away: Croatia’s eu entry, Croatia itself, eu certification schemes, Bosnian exports, or perhaps all of the above. In the mind of a politician, especially a Bosnian politician, this cannot be

entirely ruled out. For would not the most elegant, pragmatic solution be to get rid of an entire country and abolish exports altogether? Indeed, indeed, it would. The Slovenians, for their part, are looking at major problems in the banking sector as all the while public sector employees are staging mass protests – so pm Janša is undoubtedly weathering the storm too and wishing it would all go away. His Macedonian counterpart Gruevski faces an even bigger problem, a veritable tragedy, any commentary on which, for presents purposes, would demand a higher degree of solemnity than can be vouchsafed by this declaratively

cynical introduction, so we shall leave Macedonia alone for the nonce. Suffice it to say that what is true of others is true of pm Gruevski as well. As for your author, well, Zagreb accorded him, a week back, a true spectacle. The last remnants of proper Croatian fascists, chaps from the Croatian Pure Party of Rights (hčsp), attempted to stage an international assembly of like minds and even managed to enlist the support of some major European players of the far right: Front Nationale, Voopost, Jobbik and so on. This, however, was not met with approval, so their plans to hold a rally on the Main Square went sour. They even had difficulty finding a venue at which they could share their ideas. I wonder, hadn’t it crossed their minds that, in the week when the Breivik trial commenced in Norway, we would all just wish them away. Still, I don’t know that they’re quite in the process of weathering the storm, with far right ideas gaining ground all over the place, but that is not my concern. For I too can choose, and I choose not to listen to ideas that propagate racism, bigotry and suchlike. That storm, or torrent if you will, I absolutely choose not to weather. I simply wish it away.


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

issn 1848-4107

contributors Dylan Alexander (Permanent) Stephen Fish (Financial)

director Igor Dakić

photography Mens-Libera Photo, Shutterstock, IStock, Wiki Commons unless otherwise specified

sales & marketing (cro & slo) Miroslav Tomas + 385 95 63 99 702

printer Stega tisak d.o.o. Zavrtnica 17, Zagreb Croatia

sales & marketing (serbia) Miša Milošević + 381 63 224 223 sales & marketing (b&h) Amela Tanović + 387 63 691 393 publisher Mens Libera Media d.o.o. Ksaver 215, 10000 Zagreb tel/fax +385 (0)1 46 77 165

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fortnightly news / the economy

messer bh gas opens new plant in sočkovac

steel mill still seeking investment

A CO2 plant worth one million Euros has been opened in Sočkovac in Republika Srpska. This investment, by Messer BH Gas, will produce 7,200 tonnes of CO2 on an annual basis, which is needed for the B&H food and beverage industry, as well for ecological purposes. B&H industry, up until now, has relied on the import of carbon dioxide, but it is expected that they will now become net exporters.

As reported on previously at length in this and other publications, the Serbian Government purchased the Smederevo Steel Mill back in January following the withdrawal of US Steel from the Serbian market. However, since then they have been unable to source funding from a relevant investor who might be interested in taking over the plant and have now moved into the open. The Serbian Finance Ministry has called on any interested body to come forward with detailed plans for the revival of the former steel giant, and hopes to have at least some notion of its future shortly after May 4th. It may be that the Government is 'pricing' itself out of finding what it seeks, as any prospective buyer must show revenues in excess of 1 billion Euros per business year.

national bank of serbia reduces reserve requirements As a measure designed to stabilise projected inflation rates and aid recapitalisation, the National Bank of Serbia has reduced foreign currency reserve requirements for Serbian banks. The previous rate of reserve requirements for the financing of banks, over a two year period, of 30% has been reduced to 29%, while the reserve rate for financing over the same period has been cut from 25 to 22%. At the same time, the required reserve of domestic currency has been elevated by 5% to 20% for up to a two year period, and to 15% for financing over a two year plus period.

Croatian Minister of Finance, Slavko Linić, has managed to sell $1.5 billion worth of state bonds on the U.S. market. The rate of maturity of the 5 year bonds pays a healthy, if slightly risky, return of 6.375%. The price of the issue was 99.472% with an interest rate of 6.25% , and the deal was brokered by Citigroup, Deutsche Bank and J.P. Morgan. The allocated funds will be used to settle debts that are due for payment later this year. These latest bonds, however, are due to mature in 2017, when the Government is already expected to have to pay out almost 9.5 billion Kuna (1.25 billion Euros). This additional burden will saddle the nation with the kind of debt that would previously have been regarded as unimaginable.

omv petrol stations up for sale

a new shopping mall for zagreb Zagreb is to see a new addition to its already burgeoning mall-scene. This latest project is what the investors call a mini-mall, the construction of which began as far back as 2009, in Vrbani, towards the west of the city. The Point Centre is to be finished some time during 2013, and will boast 40,000m² of floor space, with 50 shops and 500 parking spaces. The company Bluehouse Capital have invested 50 million Euros into the project already, and Colliers International (who are handling the marketing and lending of retail space) say that they have already started contacting potential clients, amongst whom are expected to be three major fashion brands. The centre will create almost 500 new jobs for the local economy.

croatia sells $1.5 billion worth of bonds

dodik stands firm on budget The President of Republika Srpska, Milorad Dodik, has stated that he will be making no concessions or compromises in his efforts to see the 2012 B&H budget passed. Indeed he stressed that he expects it to be passed with the framework which had been agreed upon during the meeting of “The Six” in Banja Luka. He has further accused Bosniak politicians of undermining the proposed budget, and has said that he will not be backing the claim of the B&H Court and Attorneys Office for an additional one million KM in the 2012 budget.

The Austrian oil company OMV has decided that the time is right to pull out of the Croatian and B&H markets. They have put 91 petrol stations up for sale, 63 of which are in Croatia. OMV say that they expect to have secured buyers for these assets by the end of 2013, but that there is reason to be optimistic for an even earlier sale, perhaps as soon as Q3 of this year. So far it would appear that the Slovenian company Petrol is interested in acquiring a number of these units, as is the Optima Group, which hails from B&H but is owned by the Russian Njeftegazinkor. The Croatian company, Crodux Gas, which is owned by Ivan Čermak, is also rumoured to be looking to reenter a market they left back in 2007, when they sold their chain of Tifon petrol stations to MOL. Although OMV have put a value of 300 million Euros on their assets, it has been suggested by industry sources that the final sale price might be as low as 130 million Euros.

may 3rd - may 16th


construction of it park underway

imf releases its growth predictions for the region

nis sails into the boat market

Construction has begun on an IT and Business Park in Inđija, Vojvodina. The project, financed by the Embassy Group from India, will see the erection of four buildings, with 25,000 m2 of Class A office space, and plans for expansion to a massive 250,000 m2 within a five year period. The first phase of this mammoth project is to be completed by Q2, 2013, at a cost of 40 million Euros, which will be entirely financed in-house. Should the Embassy Group proceed with the additional expansion the entire cost will rise to 600 million Euros. Further developments beyond this point have not been ruled out.

The IMF has published its forecast for future growth for transitional countries in Europe. While figures for the CEE region are promising – growth rates of 1.9% and 2.9% over 2012 and 2013 respectively – it's a mixed bag for the individual countries comprising the Western Balkans. Bosnia and Herzegovina is expected to experience growth rates, for the same periods, of 0.0% and 1.0%; Croatia is likely to see recession in 2012 (-0.5%), before expanding in 2013 (1.0%); Macedonia fares best of all, with a projected growth of 2.0% for 2012 and even larger growth of 3.2% for 2013; Montenegro has been ascribed figures of 0.2% and 1.5%; and, finally, Serbia will also experience growth over both years, 0.5% and 3.0%, respectively.

The Serbian oil company NIS is set to branch out into the river boat fuel market. Having opened a fuelling terminal on the Danube, on March 14th, NIS are now looking to expand their operation further, and have set in motion plans to open several other terminals later in the year. The current terminal has two separate fuelling lines, for domestic and foreign vessels. It is proposed that some of these new terminals be constructed at Smederevo, and along the border with Croatia. NIS also have plans to acquire a tanker, which would allow them to fuel boats without their needing to dock. In addition, NIS are expected to move into the Bulgarian market, with Gazprom Neft's sister company Marine Bunker.

300 million euros worth of bonds to be issued by agrokor

new deal rising Croatian Deputy Prime Minister Radimir Čačić has announced the ambitious project 'Zagreb on the Sava'. This project will entail the urbanisation of what are currently vacant plots along the bank of the Sava River, which will be made more suitable for development once construction has been completed on a dam, to the West, and four hydroelectric plants on the river itself. This alteration to the river's flow would allow for the demolishing of the existing flood levies, which are problematic, making 3,500,000 m2 of building space available: to include parks, residential buildings, and office space. In addition to the planned buildings there will be improved motorway lines added to the local infrastructure, on both sides of the river. The cornerstone of all of this will be a full relocation of all elements of the Government, currently scattered throughout the area in 188 different locations. The entire project is estimated to cost 1.2 billion Euros, and will be part financed via a credit line from the EBRD, and part by a series of PublicPrivate Partnerships. Mr. Čačić has said that he expects the first spade to be turned within three years, and that the Government might be situated in their new home by 2017. The real-estate community is quite cautious with regard to the applicability of Čačić’s project.

The Croatian consortium Agrokor plans to issue 300 million Euros worth of bonds (in both Euros and US Dollars), which will be issued on the international market in accordance with Rule 144A and Regulation S of the US Securities Act. The rate of maturity of the bonds will be seven years with a return that is to be determined upon the closing of the entry bids.

general motors takes over miv Mitrovica Valve Industry (MIV), a company which is in shambles after a failed privatisation, is to get a second chance as General Motors has announced it is to purchase the stricken Serbian outfit. GM will use the MIV facilities to setup a car-part production line, which will create 300 new jobs for the town of Sremska Mitrovica.

construction of biomass plant begins peko moves into serbia The Slovenian footwear company, Peko, will be opening a new factory at Minićevo, which is near the town of Knjaževac, Serbia. The plant is due to begin production some time later in the year, most likely September, and will employ between 90 and 120 workers. The plant will produce 1,700 pairs of shoes per day to begin with, and expansion is hoped to bring the total workforce to 300 people. The total value of this investment is approximately 1.75 million Euros.

Construction of a biomass pellet plant has begun in Doroslav, Vojvodina. The investment is valued at 12 million Euros and represents a joint venture between local entrepreneurs and a Czech company, BPI. The factory will produce pellets, used for heating, from agricultural waste. The first phase of this endeavour will see the plant exporting 100,000 tonnes of pellets per annum, approximately 9 million Euros worth. The plants operation will engage a wide array of local farmers, who will supply the raw material, while there will be 40 jobs created for the local economy.


fortnightly news / of general interest

an even dozen names in the hat for serbian presidency We already knew the date, May 6th, but now we know just how many candidates will be fighting for the lion's share of the vote when Serbia goes to the ballot box next month. Some of the names have been long known, though there are late entries to the race: Boris Tadić (Democratic Party), Tomislav Nikolić (Serbian Progressive Party), Ivica Dačić (Socialist Party of Serbia), Čedomir Jovanović (Liberal Democratic Party), Vojslav Koštunica (Democratic Party of Serbia), Jadranka Šešelj (Serbian Radical Party), Zoran Stanković (United Regions of Serbia), Vladan Glišić (Dveri/Gateway Party) Muamer Zukorlić (Islamic Community), Ištvan Pastor (Hungarian Union of Vojvodina), Zoran Dragišić (Farmers and Workers Movement), Danica Grujičić (Social Democratic Union).

no local elections for kosovo

stjepan fiolić arrested Successful entrepreneur and former Croatian democratic Union (HDZ) MP Stjepan Fiolić has been placed under arrest on orders from USKOK, State Prosecutor’s special task-force. Fiolić has been charged with suspicion of wrongdoing in relation to the sale of an office building in Zagreb, which cost the State coffers some 30 million Kuna. It is alleged that Fiolić brokered the sale of this office building at a rate far in excess of its market value; there are three other Croatian citizens being charged on the same count as Fiolić, but so far their names have not been released to the public. Media analysts have offered up two names, however, those of former PM Ivo Sanader and Petar Čobanković, the former Minister for Agriculture, Forestry, and Water Management, whose ministry subsequently moved offices to the new building.

There will be no local elections, at least none run from Belgrade, in Serbian municipalities within Kosovo, because the UN mission in Kosovo (UNMIK) has refused to assist in the logistics. Although the Presidential and Parliamentary elections will proceed, indicating that there are no safety concerns and that UNMIK are satisfied with preparations in a broad sense, it is felt that moving ahead with the local elections there would be in contravention of the 1999 Security Council Resolution (#1244). While Belgrade has indicated that they wish to hold local elections at some point in the future, and that they were not abandoning any Serb-run institutions in the territory, it might be that the locals are considering taking unilateral action. Despite a plea from the Minister for Kosovo and Metohija, Goran Bogdanović, for Serbs to refrain from organising their own local elections, it would appear that some municipalities are apt to do just that. The Serbian population in Kosovo has shown an inclination to ignore Government directives in the past; however, this time, it may well be of a more serious nature as it poses a possible threat to continued involvement in the region by the International Community. The Serbian elections will take place on May 6th.

new minister wastes no time

general strike in slovenia Public sector employees went on a one day warning strike in opposition to the Government's proposed austerity measures. The strike was joined by an estimated 120,000 public sector employees protesting against a 10% cut in salaries proposed by the already unpopular Government of PM Janez Janša. Crowds took to the streets of all major cities around Slovenia, with the bulk of the protesters coming from the unions of the educational sector. Border police went on a 'go-slow', while hospitals worked according to a 'Sunday regime'. Since the Government say they will not be backing down from these announced measures, the unions have promised further protests.

The appointment of the newest Croatian cabinet member, Siniša Hajdaš Dončić, was confirmed just recently as he received the portfolio for Maritime Affairs, Transport, and Infrastructure. As readers of SEE will be well aware, his predecessor, Zlatko Komadina, had to resign due to continued poor health, although he will be able to perform his duties as an MP. At the age of 38, Hajdaš Dončić is the youngest serving Minister in PM Milanović's Government. Barely a day into his new office, and the newest Minister called a meeting with his Bosnian counterpart in order to discuss the possibility of free passage through Neum. A bridge running from the mainland to Pelješac had been an option at one point, but has since been shelved given the current economic climate. It has been suggested that a simple road, with no exits into Bosnia and Herzegovina, would prove to be the most cost-efficient solution at this stage and, with both sides reading from the same page, it is ever more likely to be implemented.

plea for reason from denis bećirović Vice Chairman of the House of Representatives of B&H Parliament, Denis Bećirović (SDP B&H), addressed an open letter to the President of the Party of Democratic Action (SDA) and Vice Chair of the House of Nations of the Parliament, Sulejman Tihić. In this letter Bećirović makes a plea for reason in the search for a solution of the conflict surrounding the proposed 2012 budget. Bećirović has urged Tihić to use his influence on the SDA officials who, until now, have been "obstructing and boycotting all dialogue on matters of vital importance for the State".

may 3rd - may 16th


charges for the attack on u.s. embassy in sarajevo

hdz slush fund trial begins

B&H Attorney's Office has filed more charges in the case relating to the preparation and execution of the October 2011 attack on the U.S. Embassy in Sarajevo. The men who these charges are being filed against are Mevlid Jašarević (1988), from Novi Pazar, Serbia, and Emrah Fojnica (1991) and Munib Ahmetspasić (1990), who are both from Zenica in Bosnia and Herzegovina. The three men are currently incarcerated and are awaiting trial. The prosecution has called a total of 39 witnesses and court experts, and will be presenting 100 pieces of material evidence.

The Fimi Media/Croatian Democratic Union (HDZ) slush fund case has finally begun in Zagreb. It is an historic first for Croatia's judiciary, as the political party, HDZ, stands accused of fiscal malfeasance, with the prosecution levelling claims that 31.6 million Kuna (4.2 million Euros) found its way into the party's slush fund. It is alleged that a team of six, led by former Prime Minister Ivo Sanader, had embezzled 70 million Kuna (9.3 million euros) over the 2003-2009 period, of which almost half found its way into the party coffers. Party Treasurer, Mladen Barišić, HDZ accountant Branka Pavošević, FIMI Media owner Nevenka Jurak, and FIMI media representative Marica Ivanković all pleaded guilty as charged, while the other two involved, former Government spokesperson Ratko Maček and Sanader himself have contested the charge, maintaining their innocence. The trial is set to be a lengthy affair, with one of the case files alone containing in excess of 50,000 pages. Sanader has also called over 50 witnesses as part of his defense, some of which, it must be noted, have been called as witnesses for the prosecution as well.

solar power plant confirmed for zrenjanin The Municipal authorities of Zrenjanin and representatives of the Belgian company Electrawinds have finally made public the plans for a 10 MW solar power facility. The exact location of this plant is still under consideration, as it needs 20 hectares, but will definitely be going ahead. The total worth of this is expected to come in just under 20 million Euros and the Belgians are confident that further developments of this nature will come to fruition, especially with the attractive price of 0.23 Euros per kW in Serbia.

serbian rakija takes first place in vegas Užice, as a region, just keeps on delivering. RB Global's plum and pear brandies, sold under the label Stara Sokolova (Old Hawk's) have been awarded gold medals at the 69th Las Vegas Wine and Spirits Fair. RB Global have already won numerous domestic awards, and see this latest acknowledgement as a foot in the door to the American market, which is certainly welcome considering they have already made plans to double their production to half a million tons of processed fruit per year. This family-owned company already exports 60% of its produce to the European and North American markets.

biometric id for b&h

dodik to testify in defense of karadžić?

As of January 1st, 2013, all citizens of B&H will be issued new, state-of-the-art biometric identification cards, or cards which feature many of the same characteristics as biometric passports. Sredoje Nović, the Minister of Civilian Affairs of B&H, stated that these new ID cards were being introduced so as to meet the requirements set by the Schengen Accord, which will affect border traffic between B&H and Croatia from next year on. Travel across the border is possible for a citizen of B&H by using a State ID card: Schengen simply applies more stringent safeguards as to the identity of those traveling.

Belgrade solicitor Goran Petronijević, legal representative of Radovan Karadžić, who is standing trial at The Hague Tribunal, has told the media that he would be calling upon Milorad Dodik, President of Repulika Srpska, to testify on behalf of the defense. It is expected that Dodik is being called to testify on the circumstances surrounding the creation of Republika Srpska, in an effort to prove that the entity was not created as a vehicle for ethnic cleansing, which is the prosecution’s contention. Dodik stated that he had not received any invitation to testify, and that he knew as much as the media did.

rudy giuliani visits belgrade Forever to be known as 'the 9/11 Mayor', and now a successful businessman, Rudy Giuliani was in Belgrade having answered an invitation from Aleksandar Vučić, a mayoral candidate for the Serbian capital. Vučić, of the Serbian People’s Party (SNS), invited the American to help rally support for his campaign, as well as to discuss potential investment opportunities for US firms in Belgrade and Serbia.


the industry

Ironically, the seven proposed border-crossings do not have railroads, ruling out the cheapest form of transport available in the see market.

The traditional Bosnian narrow-gauge railway. Will it do in the future? The answer, alas, must be negative.

may 3rd - may 16th


The Effect of Croatia’s EU Membership on the B&H Economy “B&h is in no respect ready for Croatia's accession to the eu”; “Croatia’s entry into the eu will hit agriculture the hardest”; “Dairy farmers first to go”... these are just some of the headlines that could be read in the b&h media as of late. And as there is no doubt that Croatian accession to the European family will have an effect on the b&h economy, we just hope that there will be some positive effects, along with all the negative ones the papers seem to know so much about… By Aida Tabaković


roatian entry into the eu will have a significant effect on the current state of b&h economy and, bearing in mind the existing economic ties between the two neighbouring countries, analysts concur: it will lead to significant losses for the Bosnian side unless they can find a way to meet certain European requirements as soon as possible. Above all, this relates to b&h meeting the standards for the export of food products, so as not to face losing the market of its most important foreign trade partner, Croatia, with a share of 14.85% in total b&h exports (as of September 1st, 2011). “B&h is in no way ready for Croatian entry into the Union, as it needs to meet the legal requirements, quality control standards as well as other regulations imposed by the eu”, stated Prof. Dr. Duljko Hasić, macroeconomic analyst with the Foreign Trade Chamber of b&h (vtk). Vtk estimates that b&h will need to spend approximately 80 million km in order to make the required adjustments but, with the 2012 budget not yet passed, there is no way to allocate these sort of funds, and thus no way to meet

these export requirements. “The b&h authorities have no strategy in place when it comes to what the integration processes have entailed, with the signed saa and Croatian accession into the eu. As it stands, a mobilisation of all available resources is needed in order to meet the upcoming change with as few negative

The analysts are clear in their message here: the Government needs to pick up the pace or risk damaging the economy to an irreparable state.

repercussions as possible”, explains Hasić. Towards the end of 2011 the Foreign Trade Chamber of b&h conducted an analysis on how Croatian accession might affect the b&h economy, so as to know how best to inform the public of whatever prompt adjustments are needed for the impending changes in the current practise once Croatia becomes the 28th member of the European Union, on July 1st, 2013. The results of this is an in-depth analysis of the economic ties between the two countries, taking note of the volume and structure of the trade between them (emphasising the exchange of agricultural goods), the amount of Croatian investment in b&h, the matter of the border crossings, the effects on the export of building supplies (as well as the construction workforce from b&h), the transport industry, the matter of the ‘Neum Corridor’ and free passage to the harbour of Ploče, and, of course, access to International Waters. There was further emphasis placed on a long running property issue between the two as, according to vtk representatives, b&h claims more than 1.75 million m² of land, office and building


space, hotels, resorts, as well varying stakes held in Croatian firms. This is a matter which needs to be resolved prior to the July 1st deadline. The most pressing of these issues right now is finding the means with which to protect the Bosnian food industry, which may very well be facing a complete meltdown as, under existing conditions, b&h will find it nigh impossible to export to what is its principal foreign market. As it stands now, despite sharing borders of over 1,000km, there are only two border crossings, Stara Gradiška in the North, and Doljani to the South, which will meet eu standards. If this does not change, then a significant portion of b&h’s exports of dairy, meat, and eggs will have to stop as the elevated cost of transport would almost definitely put an end to a series of small production enterprises. The analysts are clear in their message here: the Government needs to pick up the pace or risk damaging the economy to an irreparable state. Currently, of all of b&h’s (animal by-products) exports, only fish and rawhide meet eu export requirements. The main reason for this is that b&h has no quality control in situ. Or, to be fair, they have no eu certified quality control. It is, and no one disagrees, imperative that the b&h Government open such facilities to ensure that would-be export goods can be tested. The alternative is too dark to consider. Already it may well be too late for many small- and mid-sized businesses, as they generally lack the economic potential to be able to adhere to eu regulations, which are most rigorous with regard to the food industry. These are not new concerns and have been widely known to many for quite a long time: the State has exhibited a level of cognitive dissonance which is of unparalleled destructive potential. Not only is the Croatian market at risk, but any chance of deeper exports into the eu is fast receding.

dairy industry in danger The dairy industry in b&h is faced, potentially, with huge losses as they stand to lose their largest export market, the situation made even more tragic by the fact that the dairy industry is one of few branches of the b&h food sector that is doing business with a foreign trade surplus: 40-50 million litres of milk are exported to Croatia each year. There are 25 dairies operating within b&h, and these process over 220 million litres of milk per year, gathered from 21,740 small farmers, while the industry itself employs 1,280 workers. As of last year, all 25 of these dairies had Hazard and Critical Control Point (haccp) certificates,

With the Croatian entry into the eu the exporters from b&h will be presented with eu customs quotas, as opposed to the current free regime instigated by cefta.

but only ten of them had the iso 9001, and just 3 held the iso 22,000 certificate. The vtk analysis underscored the continued growth of dairy exports over recent years, with a total of 53%, in 2010, of this produce (earmarked for cefta countries) going to Croatia. It is recommended that further legislation be drawn up, and implemented, as soon as possible, so as to bring b&h standards into harmony with the eu. This will have the added bonus of bringing b&h closer to its own eventual accession talks, or at least smoothing the process once they begin. One group who are very much aware of the impending disaster are the b&h farmers themselves. Should this export market dry up it would have a knock-on effect upon local economies. “It's sad that we, the farmers, have to intervene in order for the administration to start doing their job”, says Dubravko Vukojević, president of the Farmers’ Association of the Western Herzegovina County. “When Croatia enters the eu, the traffic of products as it exists today will come to a halt: though the market will be more easily accessible to vegetable than animal by-products,” stressed Milenko Soče,

may 3rd - may 16th


croatian exit from cefta

DIRECT CROATIAN INVESTMENTS IN B&H Croatia is the third largest foreign investor in B&H (trailing behind Austria and Serbia). The two countries share a couple of important agreements: the Agreement on the Avoidance of Double Taxation, and the Agreement on the Protection and Promotion of Investments. As of July, 2010, the total amount of registered invested Croatian capital in B&H came to 482.1 million Euros, which approximates 12% of total investments in the country. The largest Croatian investors in B&H are HT (Croatian Telecommunications) and Croatian Post, followed by Zagrebačka Banka (who invested in UniCredit Bank d.d. Mostar), Finvest Corp Čabar (who invested in Finvest Drvar), Jamnica (Sarajevski Kiseljak), Belupo (pharmaceuticals and cosmetics, investing in Farmavita), Konzum, and oil giant INA who, together with the Hungarian MOL, recapitalised Energopetrol.

managing director of Agroherc Čapljina, a major fruit exporter. “We are at a stalemate: the Government bureaucracy, administration, the ministries in charge, institutes and scientific communities are all failing in their tasks. One minute before zero-hour the last, desperate attempts are being made to make the best of a terrible situation. The Deputy Minister has offered his support and understanding, and called the next meeting in 15 days time, to inform us on what can be done to save the situation.” Agroherc is one of only a few b&h companies which fulfil the eu export requirements, as it holds a Global gap standard certificate. The process of acquiring such certification is time-consuming, complex, and expensive: to be sure, it poses a practically insurmountable obstacle for small individual producers.

Igor Radojičić, President of the National Assembly of Republika Srpska, agrees that certification, acknowledgment of documents, and an insufficient number of certified inspection labs and certification agencies will pose a significant problem for future b&h exports. “B&h has yet to reach the required level when it comes to legislation regarding agricultural products, codifying food safety, regulation implementation, all of which makes for a huge internal problem, and a further external problem arises with Croatia leaving cefta, which will put an end to the current free trade regime and complicate exports even further.” But what does the Croatian exit from cefta really mean for b&h? With the Croatian entry into the eu the exporters from b&h will be presented with eu customs quotas, as opposed to the current free regime instigated by cefta. Up to now, export of live fish was allowed from b&h into Croatia but, starting with July 1st, marking the beginning of the full implementation of eu veterinarian regulation, live fish exports will no longer be possible, and only processed fish from eu certificated facilities will be allowed (there are four such facilities in b&h: Norfish, Tropic, Laks, and Žuvela). A general ban on the import of animal origin products will come into place as b&h has, as oft mentioned, failed to harmonise their regulations with eu requirements, namely fully to instigate the harmonisation process as was done in the case of the fishing industry. There is only so much that the individuals, and the individual companies can do in this instance - Posavina Koka, a private company, who export 1 million Euros worth of animal by-products per year, have organised their production in accordance with eu regulations and requirements: however, it is up to the State to provide legal and logistic framework for their operation. “When Croatia enters the eu, thus making the cefta treaty with b&h void, the negative repercussions will be felt on both sides of the border. If Croatia abandons the cefta treaty entirely, it stands to lose close to 220 million us Dollars: however, if Croatia manages to lobby for the prolongation of the free trade aspect of the treaty with the European Commission, then b&h stands to lose both import- and

“If it so happens that the Commission accepts the Croatian argument, then the b&h economy will completely lose its competitive edge in the domestic market.” export-wise”, states Hasić and continues by saying that the Croatian Chamber of Commerce has already put forth a proposal to the Croatian Government to promote their cause with the Commission in order to keep the current trading regime in place. “If it so happens that the Commission accepts the Croatian argument, then the b&h economy will completely lose its competitive edge in the domestic market since the Croatian industry would then have the complete benefit of State subsidies and access to ipa funds, while simultaneously maintaining free access to the b&h market. They could still export to us, favourably, while we would remain bound by eu regulations”, warns the analyst.

the border crossings issue Seeing as how almost two thirds of b&h border is with Croatia, having only two border crossings (Stara Gradiška and Doljani) certified to perform the inspection of food products puts b&h into an extremely unfavourable position. This is further complicated by the fact that Croatia, and the European Commission, seem adamant that two crossings were needed, and only two, while, not unexpectedly, those on the other side feel that there should be a minimum of five. Vtk contend that it will cost at least 80 million km to facilitate adequate exporting to Croatia, with the


majority of those funds being used to upgrade the physical infrastructure. A State Commission for the Integrated Border Management (iug) has been set in place so as to oversee this issue. They, like any good Governmental body, want even more, and are looking for as many as seven crossings – their argument being that fewer crossings will engender a black market economy since numerous operations will be unable to bear the additional costs borne from delays at the border, not to mention added transportation. Ironically, the seven proposed crossings (which include the two already mentioned) do not have railroads, ruling out the cheapest form of transport available in the see market. We need not go into the other benefits of using railway as a means of transport; needless to say that not enough thought has been put into the solutions already offered. In fact, the vtk study only serves to raise further questions – will this affect the transit of goods from Serbia and Montenegro (to Croatia), countries which may well find themselves the victims of congestion? Current talks have, so far, failed to reach a satisfactory solution on the subject of exports through Ploče, something that, along with the ‘Neum Corridor’, access to International waters, and related matters, the Council of Ministers have yet to attend to with any degree of competency.

The economy benefits all, not just one ethnic group... Fear is a powerful emotion, perhaps here it can be put to good use. production transfer Economic experts, such as Igor Gavran of vtk, appear to be singing from the same hymn sheet, and mirror that which has already been said: that Croatian entry into the European Union will have both negative and positive effects, but which of them becomes the dominant is solely dependent on how the institutions in charge, and the economy in general, manage to prepare and adapt to the new market conditions. Igor Radojičić agrees with Gavran: “It is positive that the countries of the region are, one by one, becoming a part of the eu, offering them a better economic outlook as well as the

region, as membership in the eu promises at least some economic improvement. That in turn means that the neighbouring countries stand to profit from associated possibilities for foreign trade and economic exchange.” Radojičić reminded us that the brunt of any negative effects will be experienced by the agricultural sector, with the new Rulebook on Fruit and Vegetables already in effect since January 1st of this year. Its elevated import criteria already pose a significant obstacle for many products from b&h, something which is corroborated by figures which show that exports into Croatia dropped by 21% in January and 27% in February. Of course it won’t just be the b&h exports which will be affected by all of these changes. As Croatia leaves cefta there will be the imposition of extra taxes and duties, which will likely affect, adversely, Croatian products as well, such as dairy, confectionary, and tobacco. It may be that several brands, common in the b&h market, may well find it no longer convenient to operate as before. Of course, those Croatian companies already present, and doing considerable business, such as Kraš, Zvečevo, Dukat, and the Atlantic Group, will find opportunities to expand, perhaps even to acquire additional holdings for their portfolios. Vtk listed other positive effects, such as the fact that the direct border with the eu will provide an incentive for development of the economy (though such things should always be a priority within any nation state), and will create more internal pressure for a more expedient implementation of eu regulations, leading to a faster route to eu accession for b&h. What was noted, and rings (perhaps) with more truth than anything else, was that the positive ‘fear’ from eu quality control might force the hands of those in power. So far, despite ample time in which to do so, the politicians have not acted as if they needed to follow the same rules as the rest of the world. It can be hoped that, finally, the b&h Government might see their way to reaching a compromise within their own fragmented clique because, at the end of the day, the economy benefits all, not just one ethnic group, much in the same way that any potential export disaster will ultimately damage the whole country in equal measure. Fear is a powerful emotion, perhaps here it can be put to good use.

may 3rd - may 16th




Pretty much like in every other country in the region, Serbia’s monetary policy-makers act as an isolated island and react to little else than to the current predicament as postulated by their international creditors and nervous governments.

may 3rd - may 16th


The Curious Case of the Serbian Dinar As the Serbian National Bank's reserves are gradually being exhausted in an attempt to stabilise the Dinar, we look at its recent history and how the outcome of elections might impact its vitality and stability. O tempora, o mores. By Miša Milošević


he Serbian Dinar has, quite recently, been hitting some historical lows against the Euro: indeed it will likely do so again before May 6th, as the attentions of the political caste are focussed firmly on the upcoming elections. To date, all efforts to save the Dinar from its inexorable slide are limited to the National Bank’s operational releases of hard currency reserves in an attempt to prevent, as nbs puts it, “severe daily oscillations of the exchange rate”, or steep and sudden depreciations which would further destabilise the already shaky Serbian economy. This, at least, has been the buzz of many days.

slipping on winter ice Just a mere five months ago, the Serbian Dinar was considered, by Bloomberg no less, the second best European currency, after the Moldovan Leu. In 2011 the Dinar gained 2.7% in value, of which 0.8% was over one day alone: this impressive jump was in reaction to Société Générale's announcement that it would increase its loans volume in the Serbian market. This particularly serendipitous piece of news

was perpetuated by the increased probability of foreign investment, which was unusual given that the eu had postponed Serbia’s candidacy only a week before. This suggested that Serbia’s eu hopes were not seen as a catalyst for an economic boost, and it would appear that those foreign companies already operating in the country had not envisioned smooth negotiations between Brussels and Belgrade anyway. In fact, it would be the 2012 elections which would, in all likelihood, be far more crucial to the stability of the Dinar, as well as State bonds. The problems, however, began before that, with the cold, icy, winter. In the wake of the National Bank’s almost daily interventions in the market, the Dinar has been sinking continuously. While 2012 has not been kind to the currency, it must be of some dismay to the banking sector that the Dinar hit its lowest ever value last week, trading at 111.76 Dinars to the Euro. Since January 1st, 2012, nbs has sold in excess of 500 million Euros in an attempt to stabilise the situation. It has been estimated, by both the banks and the Union of Economists of Serbia, that the total volume needed to return


the Dinar to its rate from the start of the year would amount to 1 billion Euros. This mirrors the situation in 2010, when the National Bank sold over 2.5 billion Euros but still witnessed the Dinar drop by 10% over the course of the year. It was 2011 which was the ‘golden year’ for the Dinar (though only in relative terms): it only took a 90 million Euros outlay to maintain the exchange rate that year, and, of that, 45 million Euros were later re-purchased.

who wants a strong dinar? Well, this appears to be a simple question to answer: everybody, or almost everybody. The more active businessmen in Serbia are either importers, or debtors, and need a strong Dinar for cheaper imports, and cheaper hard currency. Citizens also want a strong currency in order to repay domestic loans invariably tied to the Euro or Swiss Franc, and the banks want a strong currency in order to increase the payback rate, to mask their high interest rates, and to slow down the write-off of bad loans. The National Bank of Serbia will also want to see a strong Dinar, primarily to reduce pressure on prices, and perhaps to slow down the withdrawal of capital from Serbia – and thus hide all the shortcomings of the existing monetary system. Lastly, the Government (whoever is in power after May) will favour the same: the strong Dinar makes citizens happier; makes salaries appear higher; it improves the gdp; and it improves the overall fitness of the economy.

...every time the National Bank intervenes in the currency market it is using a fraction of private money, and in essence is nationalising it.

EURO / DINAR EXCHANGE RATE 2012 111.76 113




101 04.01. 12.01. 20.01. 30.01. 07.02. 17.02. 27.02. 06.03. 14.03. 22.03. 30.03. 09.04. 19.04. 25.04.

So, there’s a consensus on the need for a strong Dinar, but how might this be maintained (indeed if it can ever be reached)? There is a misconception, often encountered among the wider public, that the national hard currency reserves are substantial and sufficient enough for the purpose of maintaining the Dinar. The truth, however, is somewhat different: the current reserve, 12 billion Euros, is actually diminishing. With an ever increasing foreign debt, this reserve is coming under increased pressure – 60% of the reserve is actually that of private savers, and does not belong to the State. This means that every time the National Bank intervenes in the currency market it is using a fraction of private money, and in essence is nationalising it. Should there be a continuing shortage of fresh investment, then this monetary policy will result in a limitation on the withdrawal of hard currency from savings accounts, which could well lead to a hard currency crisis and the conversion of savings into public debt.

parallel realities This is how Nebojša Katić, a finance and business consultant based in London, sees the situation: “In Serbia, laws of economy cease to exist. We have rising unemployment, inflation which breaks European records, trade deficit, growing debt - and yet, the Dinar might be getting stronger

again”. According to Mr. Katić, the current situation is much like that which existed in the years which preceded the great economic decline in autumn of 2008. That is, with one major difference: before 2008, the strong Dinar was the result of borrowing by the private sector – and now, the State is the main borrower, mainly in an exaggerated and unproductive manner. Let us remind our readers that, back in 2008, Serbia was heading very close to a monetary, debt, and banking crisis, which was narrowly avoided by what must have appeared as a divine intervention by the imf and a Vienna-based meeting of bankers who agreed not to withdraw their money from Serbia. All of this brings us to where we are now, and the foreign debt structure: the Government’s share goes up whereas the Private Sector’s share goes down. However, because State loans have to be repaid, it is inevitable that this burden will spill over to the tax payer and affect future budgetary spending. The Government is still a much more qualified borrower than the Private Sector because it still possesses assets which can be sold and privatised, which is something lenders look for. This same, or similar, situation exists in the entire region, though: Croatia, Hungary, Romania, Bulgaria, etc. All these countries suffer from excessive public spending, have a trade balance

may 3rd - may 16th


the conservative paradox

Serbia has no other choice but to invest all out in its exports, particularly in agriculture and the heavy industry. deficit, possess high debt, and are all facing a potential crisis within their banking sectors – even Croatia, however liquid, has witnessed a number of smaller banks struggling to keep afloat. In fact we could, and should, call this a regional crisis. With this in mind we ask just how Serbia compares to the region as a whole: the fact that a decrease in gdp in Serbia was lower than in other countries in the region may very well speak volumes – but this is a purely statistical fact and does not paint a clear picture of the economic reality. Other parameters are considerably lower – from the employment rate, to the average salary, not to mention the economic and production structure of Serbia, which is below the level of the surrounding countries.

Bogdan Lisovolik, imf representative in Serbia, sees a brighter future for Serbia: “Despite the fact that Serbia's main foreign partners, Italy and Greece, are facing internal crises even though the Eurozone has shown signs of recovery earlier this year, Serbia can still catch up and base its growth on export”. Lisovolik also points out that pensions, in Serbia, amount to 13% of gdp, which is much higher than the European average of 5.9% and is a consequence of the sad fact that the ratio of tax-paying workers vs. pensioners is the meagre 1.1 : 1: only 110 people work to “support” as many as 100 pensioners. Serbia's public debt, which now amounts to 45% of its gdp, is not low any more (even though both Hungary’s and Poland’s are higher). “Such expenditure greatly affects the economy's competitiveness and it is imperative that Serbia initiate fiscal reform and reduce such expenditures,” says Lisovolik, in a recognisably obvious manner. The underlying truth is, however, much more complex – paradoxical even. If Lisovolik argues in favour of an exportbased economy, one of the most effective mechanisms to put it into effect is the controlled depreciation of the national currency – after all, the Chinese have artificially kept the value of the Yuan low for years now to achieve just this

end. After all, have not the Swiss practically panicked when the Franc reached all time highs just last year, endangering their exports and the tourism industry? Conversely, the imf is also, quite simply, a bank, and any banker will favour stability – monetary in this instance – over any other concept. And it is here that we’re faced with a conundrum: Serbia in essence has no other choice but to invest all out in its exports, particularly in agriculture and the heavy industry, and is there a better way to boost exports than to make them cheaper? Though this may be a selfevident truth, how is it, then, that everyone seems to be in favour of a recognisably conservative monetary model? The answer is simple. Pretty much like in every other country in the region, Serbia’s monetary policy-makers act as an isolated island and react to little else than to the current predicament as postulated by their international creditors and nervous governments. In other words, the monetary policy has never been an integral part of a larger macro-economic scheme, the kind of scheme which would require a national consensus and a very serious plan as to in which direction the economy should be heading and on which bases it should rest upon. Put simply, the national currency, severely pegged to the Euro, has been a matter of an improvising act, guided primarily by public opinion and foreign insistence on “stability”. And, in a country with a disastrous employment rate, a country in which the average net monthly salary barely exceeds 400 Euros, this “stability” has a price-tag on it. No pun intended, it means higher prices – in Euros. All experts, regardless of their own individual points of view and opinions, agree that it is time to change the way in which Serbian monetary policy has been conducted to date. They also agree that the forthcoming elections might provide the means with which to change the current practise. The new Government will probably inherit the most difficult of heritages since 2000, and they will likely find themselves obliged to use unpopular weapons in order to help safeguard Serbian stability without jeopardising future potential for growth. As for us, we can only hope that the new Government will also possess the ‘know-how’, the political will, and the courage to take the necessary steps. With the Sunday elections ahead of us (May 6th), we may well have the first answers in our next issue.



Crunch Time for Slovenian Banks The Slovenian banking sector may well have thought that the worst was over by 2010: Nova Ljubljanska banka (nlb), the market leader, had posted an 82 million Euros loss for 2009 and finally the global financial crisis appeared as if it might be subsiding. They were wrong. Things got much worse. By Sebastijan Maček


he banking sector is still coping with what can only be described as a perfect storm. Following the collapse, in 2008, of the us investment bank Lehman Brothers, Slovenian banks, like their counterparts worldwide, have had to cope with the drying-up of available financing. This credit crunch, however, coincided with the Slovenian housing bubble bursting, inflated by reckless lending and leveraged buyouts (which went spectacularly wrong, leaving the banks saddled with soured loans). Four years into the crisis and the banks are still in a bind. Their problems are many, and indeed complex, but the solutions, deceptively, appear to be simple. In an April 16th report (of a mission sent to Slovenia to assess the financial sector), the International Monetary Fund (imf) said that strengthening the financial condition of commercial banks would require “a combination of measures, including bank recapitalisation and the cleaning up of bank balance sheets.” This should be coupled with a “deepening of the commercial orientation of the Government-controlled banks,” which requires “tackling the long-standing governance weaknesses of these banks, which were put into the spotlight by the crisis.” In short: recapitalisation, privatisation, and the establishment of a bad bank. Plans to set up a bad bank had already been on the backburner for a long time, but in the current climate this idea is once more gathering momentum, more so with the way the credit crunch is hampering lending.

Radovan Žerjav, the Slovenian Minister of the Economy, recently confirmed that the Government has been actively considering pushing ahead with this bad bank, or perhaps a fund into which struggling banks could offload their non-performing assets. This would solve many problems, and while it is not yet clear as to how much it would cost, there are other examples in Europe (like the National Asset Management Agency in Ireland) which might provide advice, or perhaps warnings. Recapitalisation and privatisation will likely prove more difficult to accomplish.

The continued weakness of the economy might actually make it easier for Slovenia to overcome a deep-rooted suspicion of foreign capital.

Slovenia is somewhat of an outlier among former Communist countries, in that the majority of the banking sector is still in domestic ownership. The top two banks in the country, Nova Ljubljanska banka (nlb) and Nova Kreditna banka Maribor (nkbm), are majority state-owned. Foreign-owned banks account for less than one third of the banking sector by assets, according to the Central Bank, compared to 60%-90% in most other former

may 3rd - may 16th


Communist countries. One of the offshoots of the strong state grip is that the two banks, stuffed with political cronies, often approved corporate loans not based on commercial risk assessment, but on political connections and the perceived proximity of managers to whichever government was currently in office. Consecutive Governments paid only lip service to possible privatisation of the financial sector; small steps were made. In 2002, the Belgian banking and insurance group kbc purchased a controlling 34% stake in nlb, the tentative agreement being that it would eventually be allowed to acquire a majority stake. A decade later, however, kbc actually reduced its stake to 25% after refusing to take part in a recapitalisation in late 2011, due to a failure to find common ground concerning the future of the bank with the state.


€ 121.8m €-98.1m €-409.6m

Source: Bank of Slovenia

PERFORMANCE OF STATE-OWNED BANKS 2009 NLB Group € -85.9m NKM Group € 12.7m

2010 2011 € -240m € -205.9m € 20.3m € -81.1m

Source: nlb, nkbm

According to the European Banking Authority, nlb needs at least 320 million Euros by the coming summer, the equivalent of almost 1% of Slovenia’s gross domestic product (gdp), in order to meet eu capital requirements. kbc has been vague about its plans, not least because its restructuring plan, approved by the European Commission, involves an eventual withdrawal from the Slovenian market. The capital increase will, therefore, depend

on the Government as the custodian of the state’s majority stake. The problem is that the state coffers are empty. The Government says that this funding will be carried out without public contribution and it is willing to let the state holding drop to a controlling stake of 25% plus one share. Nkbm is a different story. Long a regional bank, confined to north-eastern Slovenia, it performed reasonably well throughout the crisis… at least that was how it appeared on the surface. In 2011 things started to unravel and it transpired that the risks were there, but that they were just buried deep within the bank’s balance sheet. In mid-April it was forced to restate its results for 2011, revealing that a series of ill-judged loans to property developers, who had since gone bankrupt (or as close as), had left it with an 81.1 million Euros net loss for the year, compared to a modest profit in 2010. Even the privately held banks are struggling. Abanka Vipa, the third largest bank in Slovenia, posted a 119 million Euros net loss last year after setting aside a whopping 188 million Euros for impairments and bad-loans provisions. Probanka, a small bank by comparison, also badly needs capital, having incurred substantial losses in several failed management buyouts. Everyone agrees, and businessmen insist, that problems in the banking sector need to be resolved, as they are proving to be a huge drag on the economic

recovery: desperate to shore up their finances, banks are hoarding cheap money that they are getting from the European Central Bank (ecb) and are unwilling to lend to companies, which are starved of funds to finance growth. This can be resolved by cleaning up bank balances, but politicians are, understandably, reserved. The memory of the bailout of nlb and nkbm after the collapse of Yugoslavia still lingers. The ‘n’ (for Nova) was added to their names after their balances were cleaned up in the early 1990s, at a cost of nearly 10% of gdp. It took well over a decade to pay for that bailout. What Slovenia does with its troubled state-owned banks will be a considerable test of the country’s newly found openness to foreign investment. Whatever its problems, nlb has enjoyed special status amongst the big financial firms in Slovenia, although keeping nlb State-owned has long been a cornerstone of a thinlydisguised protectionist policy. Not only is it big, it is also one of only a handful of Slovenian companies which have international presence: it also has a strong operation in Southeast Europe, Slovenia’s primary sphere of political and economic interest. Pm Janša’s current centre-right Government has tried hard to appear more open to foreign capital. It has been wooing foreign investors with promises of a “level playing field” and a lighter regulatory touch. The Government’s economic team has no qualms about foreign capital; though selling to foreigners may elicit grumbles from two of the smaller coalition parties, both of whom have a long history of advocating “national interest”, shorthand for protectionism. Although the Government has not earned much in the way of plaudits for its pro-business package of austerity measures – witness the recent massive antiausterity protests by public sector trade unions – the continued weakness of the economy might actually make it easier to overcome deep-rooted suspicion of foreign capital. After all, who wants to spend public money on bankers, who are widely perceived to be greedy and incompetent, especially when the recent track record of the state-owned banks looks shaky at best? The only question now remaining is whether there will be any takers for what, at first sight, does not appear to be a very sound investment.



Real structural change is more and more perceived as the only tool that could encourage medium and long term growth, or such growth as would enable the Eurozone to compete with other rapidly growing markets.

may 3rd - may 16th


Eurozone Financial Services and Business: Short-Term Bruises or Long-Term Prospects? While the Greek restructuring and the European Central Bank’s Longer-Term Refinancing Operation (ltro) have calmed the markets at least temporarily, the weakening economy will continue to put pressure on financial services companies across Europe and beyond. That said, Stephen Fish of Ernst and Young investigates if there might be light at the end of the tunnel.


rnst & Young’s forecast for Eurozone gdp has been downgraded again in March, with a contraction of 0.5% now anticipated in 2012. This will likely cause non-performing loans in the Eurozone to rise to the highest level since the creation of the common currency in 1999; further, lending to business is predicted to fall by 3.4%, which means a sharper contraction than the one we saw during the financial crisis. Asset management and pensions may enter somewhat safer waters as the assets under management (aum) are predicted to grow by 6% this year and recover to pre-crisis levels by 2015. Challenging times lie ahead. The Longer-Term Refinancing Operation has calmed the markets and given banks time to build capital through deleveraging, increasing retained profits, and selling selective assets when the right buyer is found, but total banking assets and loans may not recover to the 2010 level before 2015. Longer-term outlook is also moderate for insurance premiums and aum for the asset management industry, which may be able to recover to

By Stephen Fish

Stephen Fish is in charge of the Ernst & Young country practices in Serbia, Montenegro and Bosnia-Herzegovina. Stephen started his career in his native England, before moving to the Middle East. He then lived and worked for Ernst & Young in Czech Republic, Germany, Hungary, Slovenia and Croatia before coming to Serbia.

pre-crisis levels. In the short term, however, financial services in the Eurozone will continue to feel the impact of a weak economy trapped in a low growth and low investment cycle. Unrest around financial

services will naturally transfer to those businesses they work with. The weakening of the economy has been causing non-performing loans in the Eurozone to grow steadily since the onset of the financial crisis. The forecast predicts that this year non-performing loans will rise above 6% of total loans, which would be the highest level since the Euro was introduced in 1999. This hidden threat will continue to lurk around the banks’ capital levels while the world’s attention is focused on losses on sovereign debt holdings. Naturally, non-performing loans are creeping up on banks as the businesses they have lent to struggle against the weak economy. As predicted by Ernst & Young’s Eurozone Forecast for Financial Services, the economy will contract by 0.5% this year, which will cause the demand for new loans to shrink further. At the same time, higher capital requirements have affected banks’ lending capacities. The 2012 Eurozone gdp forecast has been downgraded considerably in the first quarter from +0.1% to -0.5%. At the same time,


tougher credit conditions mean the total loans to non-financial corporate and households segments could fall by eur 211 billion this year. This is a 2.3% decline on 2011, and a significant downward revision from the December prediction of a 0.9% contraction. Lending to businesses across the Eurozone is expected to contract even more seriously in 2012 – by more than 3%. One could be sceptical about the European Banking Authority’s claims that the banks’ plans to meet the new capital targets by June should not bring a negative impact to lending. The ltro may have saved the Eurozone from a broad credit crunch, but the deleveraging process is far from over. The predicted 2.3% contraction in total lending means a deeper contraction of lending to the real economy, compared to the one that occurred in the direct aftermath of the financial crisis in 2009. This is partly caused by companies which have been deleveraged sharply since then, which indicates little appetite for inward investments and rises doubts over the ability of the Eurozone economy to grow. Total assets under management (aum) for ucits and non-ucits (Undertakings for Collective Investment in Transferable Securities) declined by 8.5% in 2011. This was driven by a large decrease in aum for Eurozone ucits, which was in turn driven by reduced investor confidence resulting from the sovereign downgrades. Inflows into shorter-term funds also slowed down in 2011, as competition for retail deposits from banks increased. This precautionary withholding of retail investment from the Eurozone could start to reverse in the second half of 2012, as aum for ucits and non-ucits is predicted to rise by 6.1% in 2012 and reach the average 8% growth per annum between 2013 and 2015, when aum could finally rise above its pre-crisis peak. Pension funds have increased their share of total aum in the last 18 months, partially benefitting from the flight from Eurozone ucits. It is predicted that beyond 2014 the long-term austerity measures being put in place will drive the funding crisis for public pensions and healthcare. This is likely to result in the asset management and life and pensions industries supplementing or replacing state provisions for Europe’s ageing population.

is there light at the end of the tunnel? The Eurozone faces a challenging year, with large amounts of public and private sector debt yet to be refinanced, tight credit conditions, further fiscal austerity and more job losses. While growth should slowly return in 2013, the European Central Bank (ecb) should continue to play a central role by being prepared to cut interest rates further and by purchasing government bonds in peripheral countries. With a default on Greek sovereign debt negotiated and a second bailout agreed, policy-makers need to keep up the momentum by putting a credible firewall around Spain and Italy. Should this be the case, the Eurozone gdp should fall mildly, by 0.5%, this year. Nine of the seventeen Eurozone members’ economies are set to contract before gdp starts growing again in 2013.

In other words, Europe might well be witnessing the slowest recovery from a recession in the last forty years. One the other hand, the actions taken by the authorities - particularly the introduction of the long-term refinancing operations have created conditions where it may be possible to see light at the end of the tunnel even if actual recovery is still some way off. These policy efforts need rigorous maintenance and even reinforcement, so that the Eurozone, or its individual members, do not lose momentum. The main constraints to Eurozone growth this year will stem from fiscal consolidation and tight credit (the former may amount to more than 1% of gdp). The introduction of ltro may have boosted financial markets and receded the prospect of a banking credit crisis, but the latest data indicates that much of the liquidity provided has not yet been lent on into the wider economy.

The scale of the current crisis could trigger another positive outcome – the string structural reforms that would otherwise be considered too difficult to implement.

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Banks across the Eurozone are still facing difficult financing conditions as they strive to achieve higher capital ratios. As long as the banks are not passing on the liquidity borrowed from the ecb to businesses and households credit conditions will remain tight, which will affect both investments and consumption. Moreover, credit constraints and fiscal austerity may also become more severe and protracted than currently envisaged. In this scenario, the Eurozone would experience a deeper recession.


regaining confidence Despite a moderation in inflation this year (assuming no further rise in oil prices), consumer spending is also likely to be reduced. At the Eurozone level, growth in consumer spending is likely to be negative, at -0.7%. The outlook for business investment and consumer spending means job creation will remain weak in most economies of the Eurozone. Germany will be among a few exceptions, as total unemployment is set to rise across the Eurozone to 18.2 million in 2012. A glimmer of hope is provided by relatively strong balance sheets of many European corporate entities, meaning the unemployment trend could be quickly reversed if confidence begins to return. The European Central Bank (ecb) will continue to play a critical role in 2012, for, should the economic environment deteriorate, the ecb might have to react by lowering interest rates further and stepping up purchases of government bonds to facilitate debt refinancing by peripheral countries at affordable interest rates. Without action, there is a risk of a series of disorderly defaults among weaker countries that could threaten the future of the Eurozone, although the general risk of the Eurozone breaking up has been much smaller since late last year, owing largely to the agreements on Greece and the involvement of the ecb. This, however, does not mean that we have yet emerged out of the tunnel. The 2012 will be a difficult year for governments by all means; businesses and households will face the same. Even the weak recovery forecast for next year should not be taken for granted, given the substantial problems Eurozone will face by the end of this year. There are, however, traces of optimism that the Eurozone policy-making


Source: Oxford Economics

Economic activity picked up in the first half of 2011, but it then slowed down again in the second half as the impact of contractions in the European economy weighed on export demand and capital flows. As a result, earlier official hopes of 3% GDP growth in 2011 were thwarted, and growth of only about 1.7% was recorded for the year as a whole. Given the prospect of continued symbolic growth in the Eurozone, any hopes of stronger growth in Serbia may mean a further widening of the current account deficit, especially as conditions have become less favourable for pick-up in foreign direct investment. Continuous support from the IMF and other sources of multilateral financing will remain increasingly important to fund Serbia’s deficit. This may

community will tackle the challenges successfully and avoid permanent structural damage to the Euro. Still, the impact of the crisis on the banks’ balance sheets, combined with weak public finances in many countries, may slow down the recovery much more than in previous downturns. The scale of the current crisis could trigger another positive outcome – the string of Eurozone-wide structural reforms that would have otherwise been considered too difficult to implement. Real structural change is more and more perceived as the only tool that could

provide reassurance for investors, but concerns are mounting about the impact of slower growth on public finances and a possible loss of fiscal discipline. Given the headwinds emanating from the EU, Ernst & Young and Oxford Economics could not forecast more than 2% growth in 2012, with a pick-up to a little over 3% in 2013 – assuming the Eurozone economy will start recovering from its sovereign debt crisis. Croatia’s EU accession in 2013 is likely to encourage hopes that Serbia could follow suit, which in turn may attract additional aid and capital inflows. However, the membership process will take at least six years – and possibly much longer – as EU members will be insisting on tougher admission criteria for potential Balkan entrants following the Greek crisis.

encourage medium and long term growth, or such growth as would enable the Eurozone to compete with other rapidly growing markets. For instance, tackling rigidities in the labour market, improving the quality of institutions in some countries, taking difficult decisions as concerns the care for ageing populations, and encouraging a single market for services would all go a long way toward improving longterm growth prospects. Bottom-line is, by taking these steps now, the Eurozone governments would also take a big step towards easing the current crisis and help prevent the next one.


feature interview

Afternoon High Tea with H.E. Michael Davenport St. George’s Day, May 6th, will see the Serbian people casting their ballot in what may well be the country’s most important election to date. Of course St. George’s Day is also celebrated in England, albeit on the 23rd of April. It’s a tenuous link to be sure, but see was never one to pass up an opportunity to sip tea and enjoy some hot and buttered scones. H.E. Michael Davenport, British Ambassador to Serbia, was only too glad to put the kettle on.


EE  You have a prominent diplomatic background in Eastern Europe, having served in Poland and Moscow for quite some time. How would you summarise the transformation of the East since the fall of the Berlin Wall? MD  The transformation of Eastern Europe has, in overall terms, been a remarkable success story. Very few people had been able to predict the extraordinary changes which took place in countries of the former Warsaw Pact at the end of the 1980s. Even fewer could have predicted that so many countries of the Warsaw Pact and comecon would find their place in the European Union, or nato, and be in a position to make their own choices about their alliances. Still, even more remarkable has been the transformation of the economies and societies of former communist countries, all of which have helped to renew the commitment across our continent to those important values which bind members of the Council of Europe, including, in particular, the respect for human rights. Many countries remain in transition and continue to face serious challenges. It is to be hoped that their leadership, and their people, will be inspired by what has been achieved elsewhere in establishing democracy, human rights, and the rule of law.

SEE  This is your first posting to the Balkans. Do you see it as, perhaps, one of the most difficult regions in Eastern Europe, in terms of demography and politics? MD  Over the last twenty-five years no other part of Europe has experienced the kind of traumas that the countries of the Western Balkans have gone through. The break-up of the former Soviet Union was not entirely peaceful, and could have descended into the sort of violence we witnessed in the former Yugoslavia: thankfully, effective leadership in the region contributed to avoiding such a scenario. Many countries of Central and Eastern Europe benefited from strong and visionary leadership which helped them to stay the course of difficult reforms, moving, ever forward, towards a closer integration with both the European Union and nato. War and strife, in this region,

are fresh in people’s memories. Given the scale of the suffering, and displacement, which so many people experienced, it is welcome that current leaders’ efforts to drive forward reconciliation are meeting with such widespread support. As leaders of Serbia and Croatia, as well other countries in the region, have recognised, reconciliation is in everyone’s best interest, but it will only come about through acknowledging past crimes and the suffering which was inflicted on others. Without reconciliation we cannot expect the sort of regional co-operation necessary to improve people’s lives and offer hope for the future. SEE  How successful will the Western Balkan's ultimate transformation be, and what about their future role in the European Union?

“The British Government believes strongly in the eu’s ability to foster democracy, peace, and prosperity, primarily through its most successful achievement, the Single Market.”

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the countries of the Western Balkans will prove amply prepared for participation in the Single Market and in the eu’s institutions and legislative processes. SEE  Great Britain has never been a great proponent of the eu - as a matter of fact; you do have your own issues with Brussels which tend to keep you at a greater distance than other member countries. Yet you are supporting the move to bring in the Western Balkan countries. Is this politically or economically motivated, or both? MD  The uk – like all Member States – has engaged in healthy and lively debate concerning aspects of its membership of the eu. The British Government believes strongly in the eu’s proven ability to foster democracy, peace, and prosperity in Europe, primarily through its most successful achievement, the Single Market. This is exactly the reason why we support further enlargement of the eu – including, naturally, all countries of the Western Balkans. The process of preparation for eu Membership will catalyse and sustain the enormous progress already made, especially in terms of reforms and stability, in the Western Balkan countries; eventual Membership will preserve these gains and generate still-closer economic convergence. The eu itself benefits too: a Union representing more – and more varied – countries enjoys a greater dynamism and speaks with a more authoritative voice in the world as we strive together to solve some of the globe’s major issues. And an enlarged Single Market will bring further economic vitality and competition, benefiting consumers, businesses, taxpayers and employees all across Europe, and even beyond.

MD  The uk Government is among the strongest supporters of eu membership for all the countries of the Western Balkans. The experience of enlargement in Eastern and Central Europe from 20042007 has shown the hugely transformative power of eu membership for transitional countries – cementing democracy, security, and the path to prosperity. The experience also yielded some powerful lessons, from which the eu has learned, and which have instructed its approach to

the Western Balkans, including Croatia’s successful bid for membership. Meanwhile, Serbia and its neighbours are already pressing ahead with reforms to prepare for eventual membership, including aligning with eu Common Foreign and Security Policy positions, and joining eu-sponsored accords such as the Energy Treaty. I am confident that, as Serbia and its neighbours move towards membership, the accession process will be still further improved and that as a result

SEE  Again, a similar question: in spite of Great Britain's occasional discord with Brussels, you have always had common standpoints with regard to the Balkans? Can you elaborate on that? MD  The success during the last decade of establishing and cementing democracy, stability, and economic reform in many of Central and Eastern Europe’s transition countries, due primarily to their euled reform processes on the way to membership, is self-evident to all eu Member States, the uk included. There has always been a strong conviction in Brussels and in Member States’ capitals that this approach to the Western Balkans will yield similar, mutually-beneficial, results.


Successive European Councils have reiterated this commitment. The Western Balkans are undoubtedly important to the eu, on account not only of our shared history and long-standing cultural ties, but also on account of a number of presentday issues of critical importance such as energy, transport, commerce, and the fight against organised crime. Naturally, there are also our shared European values and like-mindedness on the world stage. SEE  Great Britain does not have a huge tradition of business in the region. Do you see that changing and which industries could your economy develop in the Balkans? MD  Whilst not among the top investors in the Western Balkans, the uk nonetheless has a significant presence here. More than 60 firms are invested in Serbia alone – some of which feature among the country’s largest private-sector employers. But I certainly believe that there is huge scope for further development of economic ties. Continued progress by the countries of the Western Balkans – in making economic reforms, liberalising markets, modernising judiciaries, tackling monopoly and corruption, and bolstering infrastructure, to name just a few areas – will certainly encourage more investors from the uk, and elsewhere, to enter the market. Serbia’s progress, along with its eu accession track, will send a clear signal of this commitment. uk firms are among the most globally active in the world and do not hesitate to move into a new market that has strong prospects; indeed, the uk government has made international trade and investment its central policy focus. As for potential industries? The uk’s economy is broad-based – firms from every industrial sector contact my Embassy for information about doing business in Serbia. The uk is among the world’s largest manufacturing nations and has particular strengths in the hi-tech, biotechnology, and renewable energy sectors which could, in time, become a bigger feature of the Serbian and Western Balkan economies. From agriculture and mining, to automotive, aerospace, retail, financial and professional services, and to the creative industries, I am confident that as the economies of the Western Balkans develop further, the more prominent will be British companies from these industries in South East Europe.

SEE  You have just returned from the Donor Conference in Sarajevo. A total of 580 million Euros is being sought, for the purpose of re-housing 74,000 internally displaced persons (idp). Are you optimistic about whether this sum will actually be raised? Do you believe that this conference might finally put an end to this humanitarian crisis once and for all? MD  The main objective of the conference was to underline the international community’s firm support to closing the idp (Internally Displaced Persons) chapter across the region, and to encourage financial backing from the international donor community for the Regional Housing

“Whilst not among the top investors in the Western Balkans, the uk nonetheless has a significant presence here.” Programme (rhp). This programme will provide housing solutions for the most vulnerable displaced persons, reaching, as you say, some 74,000 individuals. un High Commissioner for Refugees Antonio Guterres, osce Secretary-General Lamberto Zannier, and European Commissioner Štefan Füle have all taken part, illustrating strong commitment to the long overdue goal of closing this chapter. SEE  Let us turn to the forthcoming Serbian elections. Do you see them as a potential turning point which could alter, or reverse, the current political and economic course of the country? Just how drastic would it be, if we were to see a complete u-turn when compared to the current political establishment? MD  It is for Serbian voters to decide the outcome of the forthcoming local, Parliamentary and Presidential elections in Serbia. These are, after all, the first Serbian elections I have experienced at first

hand. What I find striking at this time is that the bulk of the main political parties are committed to taking Serbia forward on its path of integration with, and ultimate membership of, the European Union. This is a very positive and welcome development, reflecting the strong conviction among Serbs, especially the younger generation, that Serbia should make eu accession its top priority. We look forward to working with the President and Government of Serbia, irrespective of who they might be, after the elections to support the reforms which will be needed as Serbia embarks, in earnest, on accession negotiations. SEE  Fragmentation of parties, and potential political options, is more noticeable than ever before: could the elections actually result in a political crisis, caused by a coalition of unhappy partners? MD  Serbia is not the only European country with a wide range of political options. We in the uk have only recently had a rare experience of coalition politics. Serbia has a much longer history of coalitions. Whatever coalition emerges, after the elections, the key will be to ensure commitment to common goals. Any Government in Serbia will face huge challenges in attracting investment, tackling unemployment, fighting organised crime and corruption, and pursuing an ambitious programme of reform. Voters have a right to expect a joined-up and determined approach to facing these challenges. SEE  Finally, and on a lighter note, you seem to be the most passionate tennis player in the entire Serbian diplomatic community. Any comments on that score? MD  Serbia is a dream for all tennis addicts. Belgrade has excellent facilities and I’ve found great tennis partners, including people ready to teach me a thing or two. Serbian tennis is booming – with leading players inspiring future generations of Serbian talent. I arrived in Serbia just in time to share the excitement of Serbia’s 2010 Davis Cup victory at the Belgrade Arena. And of course it was Novak Đoković’s victory at Wimbledon in 2011 which clinched his position as Number One in the world. In 2012 we have Wimbledon ‘twice over’, with the Olympics being held there in July. I’m looking forward to some more excellent duels between Novak and our own Andy Murray.

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social economics

NARR: Find a Partner, Improve Your Lot Founded in 2009, the National Agency for Regional Development (narr) is the legal successor to the Agency for the Development of smes and Entrepreneurship. Narr has a clear mandate, as a national institution, finding itself in charge of balanced development for all regions of Serbia. And then there’s the Enterprise Europe Network... By Lee Murphy


utting right to the chase, it's no great stretch of semantics to suggest that narr is in charge here: they have responsibility for the accreditation of Regional Development Agencies (rdas) and are currently coordinating with nine rdas within Serbia. Alongside these groups narr finds itself as the driving force behind numerous projects, providing assistance in as many fields: advisory support for less developed municipalities, the standardisation of services in led offices, professional crisis management (pcm) training for municpalities, mapping of all regional development, as well as an Integrated Information System, which would be utilised in the pursuit of regional development. Naturally all the moral support in the world would be useless without some financial clout, and so it is too with narr: they supply a number of financial support programmes to assist with such things as the development of innovative clusters, to improve the competitiveness of smes, support for business incubators (grants and standardisation of services), and they have also organised, most recently, the 11th Business Base Fair, which ran from November 29th to December 1st of last year. In addition to all of this, narr provide mentoring for a number of businesses, up to 50 hours free per company seeking expert advice. It must be noted that narr also has a significant role in international and

Information is one thing, active assistance is quite another, and thankfully the een doesn’t shirk its duties in this regard either. inter-regional cooperation as both the beneficiary and the implementing partner in many projects across the globe: finno (a mechanism for fostering innovation in South East Europe), bilateral cooperation with Japan and the Japanese International Cooperation Agency (jica), as well as further cooperation with the Netherlands, Italy, and the other Western Balkan nations. Narr has also taken advantage of available grants and financing, using the Instrument for Pre-Accession Assistance fund (ipa) to help the Improved sme Competitiveness and Innovation Project (icip) and the Integrated Innovation Support Program (iisp).

And, almost exhaustively, co-financed with the Competitiveness and Innovation Framework Programme (cip), narr has helped the Enterprise Europe Network, the Women’s Entrepreneurship Network Serbia (wens), Mentors of Women’s Entrepreneurs in Serbia (wem), and the South East Europe Network of Excellence for Cluster (seeneco).

enterprise europe network serbia In order efficiently and effectively to exploit the potential of small and mediumsized enterprises in the single European market, the European Commission, in 2008, formed the Enterprise Europe Network (een), which, as the largest European network for business support, offers a variety of assistance to small and medium-sized enterprises in the European Union and beyond. The National Agency for Regional Development coordinates the een in Serbia and, along with its partners, participates in the implementation of these activities within the eu Competitiveness and Innovation Framework Programme. These partners are, apart from the National Agency for Regional Development, the Universities of Belgrade, Novi Sad, and Niš, the Mihajlo Pupin Institute, the Serbian Investment and Export Promotion Agency (siepa), and, finally, the Serbian Chamber of Commerce and Industry.

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The Enterprise European Network offers concrete services, of course, so that emerging, or existing, businesses might be better able to function in the modern marketplace. To this end the een provides information about the various directives of European regulations, the possibilities offered by a broader eu market (as well as other countries which might be part of the Network), the possibilities for much-needed business cooperation, and, most important of all, information on the various programmes and funds which the European Union have in place and which are intended for small and medium-sized enterprises. Information is one thing, active assistance is quite another, and thankfully the een doesn’t shirk its duties in this regard either. If you meet the criteria then they will gladly mediate in the transfer of new technologies and knowledge, assist in the promotion of your enterprise, and help you find new partners in other markets. The een will also help stimulate smes so that they might innovate and become more competitive within a broader European market.

your data into the system, and to keep you informed as to the profiles which meet your own demands for cooperation (as well as any companies which might be interested in contacting you for the purposes of a business relationship). Once your profile has been successfully paired with a corresponding one, then the official contacts are released by the een, and after that much of what happens is up to you!

international meetings Traditional business negotiation is not something that the Agency eschews and so, by means of large fairs and other related gatherings, they seek to facilitate the direct connection of companies by way of organising short meetings in advance of the day itself (business2business). Companies must apply for participation ahead of the event and there will be a list of all

cooperation So how is it then that you might be able to avail yourself of all of this assistance? Well, like almost every business endeavour, everything starts with some paperwork: you will need to fill in some specific forms, the Business Cooperation Database (bcd) Form to begin with (if you like), in case you want to have dealings with other enterprises throughout the European Union. There are other forms too, depending on your requirements: the Transfer Offer Form – in case you have technology which you might wish to offer to others who are in search of new innovations themselves…and it would be those companies who would have filled out the Transfer Request Form.

the database The bcd itself is the largest ‘supply and demand’ database of available business partners in Europe. In order to use this service you will need to, as we’ve already mentioned, fill out the bcd Form (which you can find on, or you can ask one of the een partners for it).Whichever of the een partners you have delivered the completed paperwork to is obliged to enter

those interested, along with their profiles, on the Network website. Each company can choose who they will meet (or heaven forbid, avoid) at the event in question, and the Network partners involved will take care of the logistics for those involved. Again, this is a relatively straight-forward process to navigate. There is a list of scheduled events on public/calendar/home.cfm. Should your company identify any event which you feel would be of interest then simply fill out the registration form on the internet or, if you’re not entirely comfortable with that, you can ask any of the partners within the Network to send you a hard copy.

foreign visits The fundamental goal of visiting foreign companies is making business connections and the transfer of knowledge, experience, and technology. The Network partners, in cooperation with their counterparts in other European countries, organise these visits and provide logistical support to the companies involved for the duration. Interested companies just need to contact the relevant partners within the Network, and express their wishes to organise a visit to a foreign company which might operate within a certain sector. The Network partners will then assess the possibility of making this visit happen, as well as investigating the conditions involved.

using the services THREE MAIN PILLARS OF NARR 1 Planning and implementation of regional development policies and measures and strengthening institutional infrastructure (RDA) 2 Nonfinancial and financial support to SMEs 3 Monitoring of infrastructural projects

The Business Cooperation Database is free, while the engagement of the partners involved with the Enterprise Europe Network in Serbia is financed by the European Union through cip and through narr. Costs incurred by any participation in foreign events are the responsibility of the company itself, while travel expenses, accommodation, etc, might be partially borne by the partners. The Enterprise Europe Network is active in more than 49 countries worldwide. With more than 600 partners (agencies, universities, technological-research developmental institutions…), and as such the Network represents the largest international organisation which promotes and supports the work of small and medium-sized enterprises. There is absolutely no reason why one shouldn’t make the most of it.


event horizon

Croatian Democratic Union's Slush, Slush & Away The case of the hdz Slush Fund is what captures the attention of the Croatian public these days: after all, the financing of political parties had always been shrouded in a veil of mystery (it still is!). Party financing has long been the topic of heated debate amongst the politicos, be they the voting public looking to rationalise their position, or journalists hoping they can be the next Woodward or Bernstein. So you can imagine the chatter when hdz found itself in the dock, just one month before the January parliamentary elections. By Dylan Alexander


o and behold! Yet another corruption trial is underway in Croatia. Of course this is nothing new to anyone who knows anything about the usual hustle and bustle of Balkan politicking. Nevertheless, the Zagreb County Court is awash with journalists, all of whom feed the media, in depth, with hourly reports of what takes place on Zrinjevac (and this on a daily basis). Indeed this may well be a show-trial: all manners of onlookers are following developments in what is now, quite simply, referred to as the ‘fimi Media’ scandal. fimi Media have, for the most part, already played their part in this saga: their name has been synonymous with corruption for over two years now; it is also synonymous, however, with former Prime Minister Ivo Sanader, and his party, the Croatian Democratic Union – hdz. If you’ve picked up a newspaper, listened to the radio, or glanced at a television set over the past 27 months, then none of this will be news to you. You’ll be aware that Damir Mihanović, former

Given the state of the defence’s plan of attack (both hdz’s and Sanader’s), it can be assumed that one, or both, will lose. board-member of Croatia osiguranje, blew the whistle on the whole affair when he claimed to have attended a 2007 meeting at which the aforementioned former Prime Minister supposedly ‘suggested’ that he, and the heads of a number of State-owned companies, should use the services of fimi Media. It was a celebrated gathering, if we might use the term: hep (the electricity utility company), Croatian Forests, hac (the motorway utility), fina (the state financial agency) and a score of others would all find themselves handing over what would turn out to be a proverbial brown – or blue – envelope.

This was accomplished by availing of fimi Media’s services, who would then ‘overcharge’ their new State clients, and then some of this money found its way into a slush fund… a slush fund which was reportedly run by Sanader, and a number of other individuals: hdz Treasurer Mladen Barišić, hdz accountant Branka Pavošević, fimi Media owner Nevenka Jurak, and fimi media representative Marica Ivanković. These latter four have already pleaded guilty to all charges, while Sanader himself, and former Government spokesman Ratko Maček, refuse to entertain the slightest notion that anything untoward ever took place.

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That a former Prime Minister of a democratic nation, about to embark on a European journey, would find himself under such a spotlight is almost unimaginable. So then, what should we call it when an entire political party, still in power mere months ago, finds itself in the exact same position? The hdz Slush Fund case is an historic first for the Croatian judicial system: the Law on Liability of Legal Persons for Criminal Offences is not often invoked by Croatian prosecutors, yet invoke it they did. While the whistle-blower could only testify on activities from 2007 onwards, it emerged that hdz had been making use of a slush fund since 2003, and that the money

Acting on the testimonies of Jurak, Barišić, and others, uskok launched their official case against hdz on October 25th, 2011, proceeding to freeze their party assets one week later, on November 1st. At this time it is estimated that hdz benefited to the tune of 30 million Kuna via the slush fund, and uskok want these funds repaid to the State. An additional 15 million Kuna has, allegedly, been appropriated in the same fashion by Sanader for his personal use. As has been said, the Western Balkans are no stranger to the concept of public sector corruption: uskok, however, have moved with impressive alacrity in their attempts to bring this sorry chapter

of Sanader’s involvement, it almost beggars belief that a Prime Minister could ever be unaware of such a fund, especially over a seven year period. Likewise, that hdz could be equally unaware that their leader had siphoned off no less than 45 million Kuna from State bodies without any alarms being set off, is laughable. Never before, at least not in the modern sense, has a political party been put on trial like this and, given the amount of evidence compiled by uskok, it would seem that no result other than ‘Guilty’ will be acceptable. For all the embarrassment that this, and its precursors, have caused, Croatia needs a definitive verdict.

the end?

was being used to fund elections (both the 2007 General Election and Jadranka Kosor’s Presidential campaign of 2005), additional (or double) salaries for Ministers, as well as sundry personal expenses. It was this source of finance that the Bureau for Combating Corruption and Organised Crime (uskok) began to investigate in October of 2011. Indeed, it has been suggested that their previous campaigns primarily against fimi Media, Hypo Bank, as well as a number of various Governmental officials was all in support of a larger goal: the gathering of enough information to catch hdz, and eventually Ivo Sanader, in a lie.

to a close. Certainly it does the Governmental incumbents no harm to have this dealt with in a short, sharp, manner, but it was hdz who were in power when all this began. What comes next may well become the stuff of legend: all the accused parties have taken a most unusual, and identical, stance in their defences. They all claim that they had no knowledge of the slush fund, and that it was the other who was responsible for its unlawful creation and subsequent abuse (though whether one can ‘abuse’ an illegal fund might well be semantics). Irrespective of the fact that there are witnesses queuing up to testify to their knowledge

And so, with all said and done, the fimi Media/Slush Fund Trial stands to be quite a lengthy one. The indictment alone numbers 500 pages and the case file currently weighs in at over 50,000 pages. Furthermore, the Defence for Ivo Sanader alone have called more than 50 witnesses, and likely more are to come as he finds himself caught between the prosecution and the army of lawyers hdz has assembled. Regardless, it will be curious to see what sort of outcome awaits us: Sanader may, or may not, be convicted (although it would appear that the prosecution has other charges to level at the former Prime Minister, especially should they fail to make something stick on this occasion), but, as things stand, it would seem that he will be found guilty on all counts. hdz, however, is a different story: a solitary man could have some hope of redemption, some chance to regain past and former glories, but should hdz be found guilty and convicted, then they will be obligated to reimburse the State for damages totalling 30 million Kuna, and find themselves with a tattered reputation, more tarnished than it is even today. Of course, in the interest of balance, it is possible that hdz emerge the victor, were victor ever an apt term in this instance. For, to win simply means that their reputation is, well, simply tarnished as it already is… In any case, given the state of the defence’s plan of attack (both hdz’s and Sanader’s), it can be assumed that one, or both, will lose: should that happen, we can only hope that they don’t try and use another slush fund to settle their debts.


in medias res

Macedonian Ethnic Tensions: or Beyond Good and Evil That there is tension between 'native' Macedonians and ethnic Albanians in the southernmost former Yugoslav Republic is certainly nothing new; however, things have flared up to an awfully dangerous level in recent weeks and months. Indeed there is a genie, and it cannot, at all times, be contained by a lamp. By Igor Dakić


n April 13th, which was a Friday – whether this is ominous or not we leave to the reader to decide – five bodies were discovered near Železarsko Ezero, an artificial lake located at the Northern limit of the capital of Skopje. Filip Slavkovski, Aleksandar Nakjevski, Cvetančo Ačevski and Kire Tričkovski were all aged 18-20, while the fifth man, Borče Stevkovski, was 45. It was almost immediately made public, by none other than Interior Minister Gordana Jankulovska that the execution-style killings were planned in advance and the victims ostensibly picked at random.

from bad to worse Although Jankulovska also said that there was no evidence “to suggest the ethnic background or the identity of the killers, nor the motives for the killing”, and although she appealed to all “to refrain from any speculations that could fuel interethnic tensions”, it did not take the Macedonian population, or at least certain aspects thereof, long to assume that the killings were ethnically motivated and perpetrated by Albanians, just as it did not take the mob long to rally up. What followed, on April 16th, were protests in the centre of

Skopje, primarily led and organised by supporters of the football club Vardar, and there was no shortage of aggressive, nationalistic rhetoric. It all culminated when the mob made a move in the direction of Bit Pazar, the part of Skopje known for its little traditional shops and crafts studios that are mostly owned by Albanians. There was commotion, masked faces throwing stones at the police, and finally an attempt to break the cordon. An

We will do well to remember that a civil war was narrowly avoided in 2001, mostly courtesy of a foreign intervention...

Albanian house had already been burned down the previous Friday, and three Albanian men were beaten up at a bus stop; and though the group was stopped at this point, it could not be prevented from attacking a local tv news crew and their van, their anger additionally fuelled by the rumour that the victims had been severely tortured prior to being liquidated as a result of a blood feud, and that both the Government and the media had intentionally kept this fact secret. The press had indeed been urged to refrain from reporting on the problems – whether to prevent further inflammation of the situation or to attempt to brush it all under the carpet – or a mix of the two – it is difficult to tell. Suffice it to say that everything is possible under the circumstances, and that even the brother of one of the victims, Aleksandar Stefkovski, urged that the madness cannot go on, no matter who the killers are. “We should stop here,” the man said. “We were hit by this tragedy more than anyone, but we cannot bring back the dead. Let us leave it to the police to do their job and find the perpetrators, and as for us, we can only grieve.” Alas, if only the business of provoking and fuelling ethnic tensions weren’t a sort of a national sport in the Balkans…

may 3rd - may 16th


then and now We will do well to remember that a civil war was narrowly avoided in 2001, mostly courtesy of a foreign intervention and the subsequent signing of the Ohrid Accord, which granted greater rights to the Albanian community, who, according to the 2002 census, make up approximately 25% of the population (roughly 500,000 in total). Passions ran wild, especially then, but no party was left with an alternative. Everyone had to comply, even the most extreme elements in both ethnic groups. As for this year, trouble ostensibly begins with the deaths of two Albanian youths in Gostivar, killed by an off-duty policeman on February 29th. These killings too have not as yet been explained – some say that the three were arguing over parking, others say that the two men had confronted the officer in order to ‘silence’ him, specifically in relation to alleged drug trade in the area. Then, as now, riots followed, including attacks on school buses and property. “What is of concern,” said President Gjorge Ivanov on the occasion “is that young people are involved in all of these events. Relevant institutions are taking measures. However, every segment of the society needs to bear a measure of responsibility for what is happening to us, starting with the family, the school system, the non-governmental organisations and the media. Everyone should bear responsibility, because we know what can happen when corrupted young people incite events which affect interethnic relations in the country."

Tensions peaked around the middle of March, a period marked by a quaint contest staged by Albanian secessionist parties and groups, namely as to who would be louder and more determined in uttering that ethnic Albanians have no future in Macedonia and that partition is the only solution. The pot was simmering until… well, until more people died and until young people, in this instance Macedonian football hooligans, got involved again. Ismet Ramadani, a former Macedonian mp and political analyst, inferred that much of the tensions were a result of Macedonian political policy. “pm Gruevski’s Government is pursuing a nationalistic and conservative policy, which creates tension and anxieties in a multiethnic society like that of Macedonia,” said Ramadani, an ethnic Albanian.

Macedonia is a comparatively young nation, still in the process of creating a structure on which to base the edicts of its own identity.

Indeed, although it is true that one of the main political and social platforms of most Albanians leaders is further ghettoisation of their own people – for instance, despite legally binding documents and strategies adopted by the Government, including the one on integrated education in 2010, Albanian children, in Albanian only schools, are not allowed to learn the Macedonian language until Third Grade (age 9-10) – the nationalistic stance of the Macedonian Government is of little help.

beyond good and evil Macedonia is a comparatively young nation, which means that it is still in the process of creating a structure on which to base the edicts of its own identity. Macedonia is also a relatively poor country, which in turn means that the political establishment will be all the more apt to exploit those ‘colourful’ populist platforms such as football, religious affiliation, and, of course, the myth of Alexander the Great. Still, how is any of this any different from the situation in the other former Yugoslav Republics, excepting Slovenia, if only to a measure? It is no different in essence, but it has a slightly different context, insofar as the most pressing Macedonian socio-political realities are a bit more retrograde. The last statement is not an insult, but a statement of fact – all Balkan States emerged in the early nineties as National States, with a definable ethnic prefix, which means that relevant minorities (Right Wing extremists and militaristic pragmatists would call them “troublesome


minorities” – Serbs in Croatia, Kosovars in Serbia, “everybody” in Bosnia, and so on), especially given that we are talking about recognisably immature societies, would be treated as citizens of a second order. The power to integrate rests always on the dominant ethnos; strange as this may sound to many Macedonian ears, ethnic Albanians as a relevant minority have to be “persuaded”, their origin notwithstanding, to support Macedonia in, say, a sporting contest. This, of course, is not easy, and demands the use of wellplanned, sober and effective mechanisms. It requires patience, tact, intelligence and – yes indeed – evidence that Macedonia is

maturing into a society that can vouchsafe equal rights and opportunity for all, a wealthier society. On this score, there is very little evidence that Macedonia is heading in the right direction. For instance, Former Interior Minister Pavle Trajanov, now an mp in the ruling coalition, said that the April 13th murders were “a classic terrorist act that may have dire consequences for the peace and stability of the country, heavier even than the [1995] assassination attempt against President Kiro Gligorov”. This kind of rhetoric is unbecoming, especially in light of the fact that we simply do not know for sure what exactly is it that happened that day. It may be true that Macedonians are currently in process of putting a fishing touch on their own national identity, but one cannot escape from the impression that there is no more time for these finishing touches, that it is high time, or practically the last moment, to start building a culture based on

If Macedonia is in a way stalled, it is not primarily stalled because the Albanians need to improve, but because the authorities keep choosing the easy way out.

inclusion, the rule of law, the kind of culture that would – inasmuch as it is possible – be bereft of empty mythmaking. For, if Macedonia is in a way stalled, it is not primarily stalled because the Albanians need to improve, but because the Macedonian democratically elected authorities keep choosing the easy way out, and that is to perpetuate, howsoever quietly, a society based on conflict. For, you see, there are plenty of wild ideas running amok in the cafes and betting shops of Skopje. That the five murders may have been a deliberate politically masterminded plan designed to destabilise whatever weak peace there was. That it may have been the work of the Greeks. That, some Albanians feel, it may have been a Serbian attempt (supported by the Russians of course) to besmirch their people, and so on. Although, without much surprise, the eu, nato, and Embassy heads have all condemned the spiralling situation and called for stronger political leadership on the ground, the said conspiracy theories and uneducated guesses paint a very clear picture, seen in this and especially the last century numerous times the world over: it all smells of that particular type of sophomoric, amoral, public house revolution which Macedonia cannot, under any circumstances, entertain even the notion of having. For that would mean going beyond the realm of good and evil, where people are merely pawns in a ploy which can look organised and meaningful only to the most paranoid of characters. Macedonia is Europe, and so are its Albanians. It is high time they took this fact for granted. It is high time for them, both parties if you will, to start sharing it.

may 3rd - may 16th




The dawn warms the soul thence, / The sun shines bright in the highlands: Yonder emerges a vast expanse, / Nature's power with great opulence: The clear lake you see as white in hue, / Or darkened by the wind as blue; Look at the plains, at the mountains, / Beauty everywhere divine reigns. To pipe there my heart's ecstatic cry, / So the sun may set, that I may die. Konstantin Miladinov, an extract from Longing for the South (translated by Igor Dakić)

may 3rd - may 16th


Ohrid, Blue Pearl of the Balkans With the verse to the left, from the poem ‘Longing for the South’, the 19th century poet Konstantin Miladinov nostalgically recollects his old country. Writing in distant and cold Russia, he muses on the lake and its wind swept waters, washing the shores of his home town. Welcome... By Miroslav Tomas


he ‘South’, as referred to by the poet, is what is at present known to us as the Former Yugoslav Republic of Macedonia, a somewhat cumbersome name for what was once the southernmost republic of the Yugoslav federation. Situated in the South of the Balkan Peninsula, Macedonia sits athwart the very centre, bordering Serbia and Kosovo to the North, Greece to the South, Bulgaria to the East, and Albania to the West. This country, of ancient and rich history, with Illyrians, Macedon Greeks, the Romans, Byzantines, Slavs, and Ottoman Turks all contributing threads to its cultural fabric, can truly be called the Heart of the Balkans. Macedonia is a landlocked country with rugged mountain ranges surrounding the central Vardar River valley, with over fifty lakes and numerous mountain peaks towering high above us. It is a land of pristine wilderness and spectacular sites, be it natural phenomenon or architectural constructs, that span a period of over three thousand years. A hundred kilometres from the Aegean Sea to the East and the same distance from the Adriatic

to the West, despite its mountainous terrain, Macedonia receives all the benefits of a mild Mediterranean climate, making its valleys an agricultural paradise with numerous vegetable groves, orchards and vineyards. But, for all the myriad of wonders Macedonia has to offer, one location stands out, with its unique natural beauty, and its historic and cultural significance. For Ohrid, both the lake and the city, have been placed on the unesco World Heritage list both as a cultural and a natural site, one of just seven such locations in Europe.

the lake Ohrid is the largest lake in Macedonia (and also on the Balkan Peninsula). It sits on an elevation of 695 meters above sea level on the south west of the country. The lake borders Albania, with approximately one quarter of its surface falling under its auspices. Seeing as the country is landlocked, the lake is known locally as the ‘Macedonian Freshwater Sea’ and the ‘Blue Pearl’. Its vast expanse of water, surrounded as it is by skyline dominating


mountain ranges, makes for a spectacular sight. It is no surprise that Ohrid has evolved into a local tourist magnet with numerous hotels, vacation homes and resorts readily available, and it has proven a popular getaway for all Macedonian residents. Though the majestic beauty of the lake and its surroundings is truly captivating and has inspired many a visitor over the course of centuries, what is most impressive about it in fact remains hidden from casual sight, deep beneath its surface. Ohrid has a surface area of 358km², with a maximum depth of 286m, and plays hosts to a vast array of submarine flora and fauna. The vast depth of the lake can be attributed to its tectonic origins, and it is estimated to be between four and ten million years old. Being geographically isolated from other bodies of water, the lake has, over the millennia, served as a sanctuary for many organisms from the Palaeocene period, preserving them to this day, and making Ohrid a museum of living fossils. Many biological species have evolved into new ones sheltered in the Ohrid depths, and so, of some 300 species living in the lake, two thirds are endemic organisms. The lake is home to seventeen different fish species, of which the most numerous is the Ohrid Bleak, whose scales have been used to produce the famous Ohrid pearls, to this day a popular souvenir and once one of the backbones of the local economy.

the city Sitting on the north-eastern shore of the lake is the city of Ohrid. First mentioned in the 3rd Century BC as ‘Lichnidos’ (coming from the Greek name Lacus Lychnitis, meaning White Lake), Ohrid is a city of 55,000 inhabitants situated on a cape that stretches into the lake, with its historic centre, the medieval Emperor Samuel’s fort, sitting on a ridge rising high above the shore. Now a popular tourist centre, it is a place of tremendous historic significance. Though the Greek reference coincides with the period when the locale came under the rule of Philip the Second of Macedon, the lake and its surroundings were, prior to this, populated by the ancient Illyrians who were eventually driven out by the Macedonian conqueror. After the Romans subdued Greece in the 2nd Century bc, Lychnidos The Church of Saint John at Kaneo (Crkva Svetoga Jovana Bogoslova)

may 3rd - may 16th


A place one should visit to experience the true Balkans in all its magical beauty. Nevermind the current political situation. became a vital point on Via Egnatia, a road connecting the Aegean and the Adriatic coast. With the Romans eventually came Christianity, and the city became a religious centre and a place of pilgrimage. With the arrival of the Slavic population into the Balkans Ohrid also became a centre of culture with St. Naum and St. Clement, founders of the Macedonian Orthodox Church, who were spreading Christianity among the populace in the 800s. The city reached its peak in terms of its political significance in the 10th and 11th centuries, when it became the capital of Emperor Samuel’s state, which encompassed the vast territory of what is now Macedonia and Bulgaria. After the downfall of Samuel’s empire, Ohrid changed hands between Byzantium and Bulgarians before coming under the rule of Serbian lords; and, sharing in the fate of the Kingdom of Serbia, it became a part of the Ottoman Empire in the late 14th Century. Not to trouble the reader any further with the history of political influences on the region (as it is in fact a story in its own right), we turn instead to the cultural heritage bestowed on this unique city. Back in the late Middle Ages, Ohrid was said to have had 365 churches, one for every day of the year, thus earning the nickname Jerusalem of the Balkans. Though not nearly as many are left standing, the whole region is abundant in religious monuments; Orthodox and early Christian basilicas adorn the cliff tops all around the lake. The crown jewel among them is the Church of Saint Sophia, located in the city of Ohrid, dating back to 11th Century.



Castle Ohrid, The Citadel

The Ottoman Turks additionally endowed the city with a specifically oriental, urban appearance, with winding narrow cobblestone streets leading up to Samuels’s fort from the lakeshore. Public baths, a covered market (bezistan) and 19th century town houses (with carved stone foundations and white plaster facades of the multi-story superstructures), give the place a feel reminiscent of old Istanbul. Traditional craftsmen working in silver, copper and wood still tend their family-owned street side shops, just as the generations before them did. The modern Ohrid, be it the city itself, or the lake, is a place of hotels and resorts. Located all around the lake they make for the bulk of the Macedonian tourist industry. One of two Macedonian International airports is located next to the city, and though the motorway will get you only as far as the capital of Skopje, the local roads leading to Ohrid provide some truly fantastic scenery, which might atone to a degree for the lengthier drive.

the ohrid summer As is only befitting of a place of such natural beauty and historical heritage, Ohrid is at present a major cultural centre. Captivating and inspiring artists throughout the past, the lake hosts a number of art colonies, poetry festivals and other cultural events. The highlight of the cultural season, however, is the ‘Ohrid Summer’ festival, taking place each year in the months of July and August. Dedicated to classical music and theatrical arts the festival has a tradition dating back to 1961 and has over the years evolved into one of the top European events of its kind. Having marked its golden jubilee last year, the organisers have pledged to outdo themselves in this year’s edition of the Ohrid Summer. The festival is in part held at the ancient Hellenistic amphitheatre that dates back to the 2nd century bc, situated under Samuel’s fort and overlooking the majestic lake. This spectacular venue has in the past hosted such musical greats as

Struga is the other major city situated on the Macedonian side of Lake Ohrid. It is a city of 33,000 inhabitants, with a history as rich as that of Ohrid. According to legend, Emperor Samuel was crowned in the Church of the Blessed Madonna just outside the city. The poet Konstantin Miladinov was born there in 1820. Miladinov is regarded as the father of Macedonian poetry, and together with his brother Dimitri he played a crucial role in the awakening of the Macedonian national spirit in the times of Ottoman rule. The nostalgic poet who wrote such emotional verse never saw his native Struga again. Upon his return from Russia he found that the Turks had imprisoned his brother and so made his way to Istanbul to affect his release. Unfortunately, the ill-fated hero only ended up sharing in his brother’s fate and ultimately met his demise in a Turkish prison in 1862. To keep the memory of the two brothers the city annually hosts the ‘Struga Evenings of Poetry’, an international poetry festival, the laureates of which are names such as Pablo Neruda, Joseph Brodski, Eugenio Montale and Seamus Heaney.

Zubin Mehta, Jose Careras, Enio Moricone, Gideon Kramer, Julian Rachlin, Katia Ricciarelli, and the list goes on, and on, and on. Bearing all that has been said in mind, one can only ponder on this extraordinary corner of the world as one of those precious and special places where one might feel in touch with the primordial essence of nature and man, a cradle of great civilisations long past, yet still living. A place one should visit to experience the true Balkans in all its magical beauty. Nevermind the current political situation.

may 3rd - may 16th



good stuff

Must-Bring-Back from Serbia Touring around Serbia? These are the things you simply cannot leave without. Užice Kajmak


Kajmak is a creamy dairy product somewhat similar to clotted cream, only with a slightly higher fat content. The word itself is of Turkish origin, and the product is well known throughout Asia Minor and the Balkans. Kajmak is made from cow’s milk and is sometimes aged in order to give it an added richness of flavour. Although a seemingly simple dish, it must be noted that Kajmak specifically produced around Užice stands out for its quality and is as such revered all around the region. Kajmak is usually enjoyed as a starter with bread and olives, or as a side dish with grilled meat. As in the case of other reputable dairy products in the Balkans, you’re better off avoiding the commercial efforts (often they just seek to capitalise on the name) and get your hands on some of the homemade stuff.

Opanci are the traditional peasant footwear, specific to the Balkans, and are made from strips of sheep hide, which are of varying colour depending on the region from which they come. The Serbian version of opanci, however, has very specific characteristics and tends to stand out at first glance, especially on account to a curved horn, styled from leather, on their tips. This Serbian variant, known as ‘šiljkan’, meaning ‘spiked’, comes from the Šumadija region, and up until some fifty years ago was worn regularly by the peasants who farmed the land. Though nowadays exclusively a souvenir, or part of a folk costume, opanci have lost none of their allure.

Pirot Rug Pirotski ćilim, or to translate, a rug from Pirot, is a product of traditional craftsmanship, seeped in rich folklore. Pirot is a small town in the South-East of Serbia in the foothills of Stara Planina (Old Mountain), and it is from here that the quality wool used in the weaving of these carpets comes from. Although it is assumed that the craft reached Serbia via the Ottoman invaders, it has nevertheless become extremely characteristic of the Serbian ethos. Believed to hold magical powers, these carpets have been historically woven as good-luck charms, specifically for Serbian rulers. They remain a beloved national symbol, but it may well be that we’re speaking of a dying craft. So, hurry up...

Pear Brandy Seeing as how rakija is most commonly distilled from either grapes or plums, this variant, which would ideally be based on the Williams Pear, is held in high regard as a delicacy. A spirit intended for special occasions, 'viljamovka' was originally prepared by orthodox monks, who then decided to add an extra feature by putting a bottle over a branch with a pear bud on it so that the fruit would develop inside the bottle, which they later filled with pear brandy. Though the industrial production gets around this problem by gluing the bottom of the bottle after the pear is inserted, we direct your attention back to our above stated piece of advice: the traditional stuff is still the best, so do not be surprised to see bottles affixed to pear trees as you drive around the countryside. Especially in the vicinity of a monastery.

may 3rd - may 16th



to-do list

Red Bull Flying Bach

Investment Summit Croatia-SEE


May 3rd

May 9th

May 12th

INK, Pula (20:30h) / Flying Steps perform to the music of J.S. Bach, world tour opening

Kino Šiška, Ljubljana (21h)

/ British soul and R&B star promotes her new album

Križanke Summer Theatre, Ljubljana / Anyone care for a revamping of the good old French chanson? We do.

May 5th

May 9th - May 12th

May 12th

National Theatre, Belgrade (19h) / Opera by Sergei Prokofiev

Zagrebački Velesajam, Zagreb / Tourism, wine and gastronomy fair

KD Vatroslav Lisinski, Zagreb / Juanjo Mena (conductor), Sol Gabetta (cello), works of Mahler and Shostakovich

Red Bull Flying Bach

The Love For 3 Oranges


Tourism, Enogastronomy


BBC Philharmonic

May 7th

May 9th - May 13th

May 12th

Westin Hotel, Zagreb / The P. World agency sales and marketing conference

Fair Grounds, Belgrade / 55th IT, telecommunications and technology fair

Cankarjev dom, Ljubljana (20:30h) / The supreme champions of Fado, in Slovenia this time

The Sales Experience

Tech Achievements Fair


May 8th - May 26th

May 9th - May 23rd

May 14th

Ljubljana / 28th International world music and contemporary jazz festival

National gallery of B&H, Sarajevo / World press photography exhibition

Kinoteka B&H, Sarajevo (19h) / Second World War epic starring Marlon Brando

Druga Godba Festival

World Press Photo

The Young Lions

May 9th

May 10th - May 12th

May 17th - May 19th

Westin Hotel, Zagreb / The Swedish Embassy and the Swedish Trade Council stage a top level event

Lukavac, B&H / 10th annual tourism, hunting & fishing fair

Zagrebački Velesajam, Zagreb / 39th medical equipment and pharmacy fair

Inv. Summit Croatia-SEE

LIST 2012

Medicine & Technology

may 3rd - may 16th



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see magazine 06