S U P P O R T E D B Y T H E C R O A T I A N C H A M B E R O F E C O N O M Y

pvpvinternationalinternationalCroatian Business & Finance WeeklyEstablished in 1953Monday / 1st October / 2012Year V / No 0215www.privredni.hr

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

PAGE 4-5

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

PAGE 3

2008 20092010 2011

Drago Živković

A dministrative obstacles and tax burden are the two heaviest weights on

the shoulders of Croatian export-ers. Finance Minister, Slavko Linić, so admitted during a meet-ing with members of the Ex-porters’ Club, founder of Lider magazine. Thus, the Govern-ment wants to help exporters in two ways. The first is to prevent further deterioration in terms of exports to CEFTA countries af-ter Croatian EU accession. The main role will be played here by the Foreign Ministry, and Linić claims it is becoming more cer-

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

Fiscal consolidationLinić sees cancelling of tax relief on business cars and representa-tion as necessary cuts, since the

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

es. Hrvatska poštanska banka (Croatian Postal Bank – HPB) and the Croatian Bank for Re-construction and Development (HBOR) have expanded their services for financing exporters; repayment deadlines have been

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

EXPORTERS’ CLUB MEMBERS MEETING WITH FINANCE MINISTER SLAVKO LINIĆ

Minister admitted tax load is a burden to Croatian exportersThere will be no changes in state policy next year; tax will not increase but the economy will be additionally relieved by lower compensations of regulatory bodies

Minister Linić announced property tax once again, but without concrete figures

The Financial Business Act should introduce great chang-es with which the Government sends a clear message: it is de-termined to solve the problem of illiquidity. The total value of unpaid invoices now stands at €5.9 billion plus €2 billion in in-terest, of which the value of un-settled debts over 360 days over-due is €4.86 billion. Linić intends to solve the debt of 57,000 com-panies by the end of the first quarter of 2013, transforming tax debt into subscribed capital.

Solving debts

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

PAGE 7

2

W e are continuously faced with a wide range of choices. We are wit-

nessing a race against time glob-ally, resulting in the sacrifice of our personal development where education and a degree qualification have a fundamen-tal role. The acclaimed phi-losopher, Francis Bacon, once stated: “Knowledge is power”. You never know when a new business opportunity, leading to higher earnings or career ad-vancement, will present itself. Education allows you a critical change for your business. We launched the online degree programme at the Doba Faculty 12 years ago, aiming to build de-gree programmes tailored to meet student requirements without the need for regular attendance at lectures. Doba Faculty is the only Faculty in South-East Europe currently providing online de-gree programmes through mod-ern pedagogical practices such as constructivism, teamwork, case studies and the development of competencies. The entire online

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

During the academic year 2012-2013 Doba Faculty will provide online degree programmes for Croatian students, as well as ob-taining an online masters degree recognised throughout Europe. The Masters programme in Inter-national Business in Croatian is primarily intended for those who are time-poor and yet are striving for development and career ad-vancement.

Privredni vjesnikYear V No 215

IMPRESSUM:

Privredni vjesnikKačićeva 910000 Zagreb+385 1 5600020uprava@privredni.hr

www.privredni-vjesnik.hr/subscription

FOR PUBLISHERNikola Baučić+385 1 4846661uprava@privredni.hr

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

EXECUTIVE EDITORSAndrea Marićmaric@privredni.hrVesna Antonićantonic@privredni.hr

IMC MANAGERDea Olup +385 1 5600028olup@privredni.hr

TRANSLATIONLučana Baneklucanab@gmail.comMirjana Cibulkamirjana.cibulka@gmail.com

INTERNATIONAL OPERATIONS Ray Fletcherfletcher@privredni.hr

Viljem Pšeničny, Dean, Doba Faculty

Global trend towards online degree programmes in Croatia

Online degree studies administered through

Blackboard, a virtual classroom is used by over 2,000 faculties

worldwide

Drago Živković

F ollowing Croatian EU ac-cession overall incentives for small and medium-

sized enterprises will certainly double, from €13.5 million, as planned for 2013, to between €30 million and €40 million in 2014, as announced by Gordan Maras, Minister of Entrepreneurship and Crafts at the EUforija conference. Nevertheless, small and medium-sized companies are an excep-tion within the current recession, having seen 1.3% growth during the first six months, according to Maras who forecasted 3% growth in 2013. In addition, SME’s creat-ed 13,000 more jobs over last year, with investment rising by 5%.

Doctors and nursesThe impact of Croatian EU ac-cession is currently uncertain. There are uncertainties concern-ing the regulation of cross-border services (particularly those pro-vided by doctors and nurses, as well as those by architects), stat-ed Lidija Švaljek, Director of the Business Information Centre at the Croatian Chamber of Econo-my. If there is a significant brain-drain of Croatian doctors and nurses, their jobs could be taken by colleagues from EU member states having lower salaries such as Romania or Bulgaria.

There are ample variations amongst banking regulations in

the EU and there is a long way before the unification of those regulations, according to Andre-Marc Prudent, Board President of Societe General – Splitska Bank. Banks will need to increasingly rely on national savings, whilst si-multaneously decreasing their re-liance on foreign loans. Neverthe-less, attracting national savings could adversely affect the life in-surance market, opined Prudent. Entrepreneurs will tend to look increasingly towards alternative financing and consequently banks need to adapt by expanding the range of their services.

Changes in banking marketPreservation of the single Eu-ropean currency will require a broad range of reforms within the financial system that will result in significant changes in banking markets. Money markets have be-come far more nationalistic com-pared with the pre-crisis period, which has been confirmed by a substantially lower number of cross-border loans amongst banks within the EU, as stated by Vedran Šošić, Deputy Governor of the Croatian National Bank. Increased local market orientation threatens common monetary mechanisms and hence negotiations on the fis-cal pact are in progress in order to limit fiscal sovereignty of sin-gle states. Šošić concluded that Croatia is joining a European Un-ion that is wholly different from that with whom she negotiated.

On the fringe of Europe

Croatia is joining a EU

different from that with

which she negotiated

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

www.privredni.hrBusiness & Finance Weekly 3

Jozo Vrdoljak

P rivredni vjesnik talked with Helena Budiša, Director of UHY HB-

Ekonom, certified auditor and EU Ambassador of Female Entrepreneurship, about the influences of tax policy on en-trepreneurs. UHY HB-Ekonom is one of two Croatian audit companies that is a member of the international organisa-tion of audit companies UHY International from London.

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

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

in instances of inheritance and endowment, turnover tax on buy-ing and selling property, tax on income acquired from leasing, and tax on income acquired from selling property. All these taxes comprise only 0.8% of all taxes

collected in Croatia. Besides the mentioned property taxes, util-ity fee is also paid, which is the income of local administrations.

How will this affect offer and demand?It will lead to an even larger of-fer of property on an already saturated market and sale at ex-tremely low prices. This tax can be introduced when the situation changes, all property legalised and public standards increase, as in France for example, where property estimated over €1.3

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

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

Not the right time to introduce new taxesCroatia and its taxes have long ceased to be competitive with neighbouring countries and soon with all European countries

It is crystal clear that every rise in direct

taxation discourages investors forcing them

to leave Croatia for countries with lower

taxes

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

was increased by the amount of the divi-dend tax of 12% plus surtax. Both taxes are higher than in most developed EU countri-es. Croatia has a higher profit tax than coun-tries that have recently joined the EU (Bul-garia at 10% and Romania at 16%), and it is also higher than the rate of EU members in our direct vicinity: Hungary, the Czech Re-public and Slovakia (all 19%), Slovenia with 20%. However, it is significantly higher than in Serbia and Bosnia and Herzegovina. It is crystal clear that every rise in direct taxa-tion, such as profit tax, discourages inve-stors, forcing them to leave Croatia for co-

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

4 Privredni vjesnikYear V No 215

::: news

JGL increasing staff numbersThe Rijeka-based Jadran-Galen-ski Laboratorij (JGL) has em-ployed 67 additional staff in Cro-atia and 93 in JGL representative offices in Russia, Kazakhstan, Ukraine, Slovenia, Macedonia, Kosovo, Bosnia and Herzego-vina and in the USA irrespective of the recession. The number of employees in the company now stands at 581 (of which 335 in Croatia), which is 10% up in re-lation to 2011 and the number of the newly employed is expected to reach 14% by the end of the year. The average age of JGL em-ployees is 36.

Pevec revenue in 2012 almost €94.6 millionDuring the first eight months in 2012, Pevec, which currently employs 884 staff, generated €58.9 million in revenue and ex-pects to generate around €94.6 million by the end of the year. This year, revenue has risen by 10% compared with 2011. The shareholder meeting is scheduled on 31st October, with the majority shareholder being the Ministry of Finance with 21.57% ownership.

Vessel delivery

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

Igor Vukić

Croatia will finish this year with a fall in GDP, accord-ing to analysts of all major

banks. Hrvoje Stojić from Hypo banka predicts a 2% fall; Hr-voje Dolenec from Zagrebačka banka corrected his previous outlook to -1.8%, while Ivana Jović from Privredna banka an-ticipates GDP to decrease 1.7% by end 2012.Stojić is not optimistic even for 2013. His analysis came in with a 1.5% deficit. Hrvoje Dolenec an-ticipates a surplus of 0.5%, while Privredna banka predicts a mild 0.8% GDP growth. Stojić, whose conservative (or pessimistic) out-looks for the past three or four crisis years proved to be right, anticipates a mild 0.3% growth by end 2013, with stronger re-covery in 2014 or 2015.Stojić bases his analysis on de-creased investment, aggravating external surroundings and nega-tive influence brought on by the process of organising public fi-nances. He points out that fiscal consolidation is more based on the efforts to increase income than to rationalise social rights. Restructuring of state owned companies is slow, unemploy-ment is growing and income reduction is effecting personal spending.

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

tient of Europe; however it slow-ly implemented reforms, espe-cially on the labour market. Now, during the crisis, this has proved to be an advantage. Croatia could

follow this trend, according to Stojić, who has noticed a change in economic policy concern-ing some government measures. The Representativeness Act will, for example, will limit the role of unions in making macroeco-nomic decisions. The precondi-tions for the liberalisation of the labour market are being created and there are efforts to speed up the restructuring of public com-panies. Tourism should be ad-ditionally boosted by the de-creased VAT rate at beginning of next year. The Government has already started to imple-ment a certain internal devalua-tion (mini tax reform, announced faster restructuring of insolvent companies), which represents support for economic recovery. Despite everything, Stojić does

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

OUTLOOK FROM ECONOMIC ANALYSTS ON GDP FALL THIS YE

Not even tourismcan increase GDEconomists are not optimistic for 2013. The analysis of Hrvoje Stojić came in with a 1.5Ivana Jović anticipates a mild 0.8% growth in GDP

Stojić does not anticipate recovery in the economy

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

“”

www.privredni.hrBusiness & Finance Weekly 5

Sanja Plješa

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

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

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

OVER 56.000 MICRO BUSINESSES REGISTERED THIS YEAR

Micro businesses are self-employed and

companies with up to 10 employees (90% share in

Croatia)

EAR

m DP

% deficit. Hrvoje Dolenec anticipates a 0.5% surplus, while

The budget for 2013 will be an important test for a positive eco-nomic situation during the next two years since it must include decreasing expenditure and ex-panding structural reforms.

Mild optimism neverthelessFitch’s credit rating had a posi-tive effect, offering an oppor-tunity to meet the requirements of the demanding programme of reforms, Dolenec concludes.

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

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

Šantić: GDP growth

higher VAT rate. Expenditure decreased

Hrvoje Dolenec, Zagrebačka banka

Micro businesses attract banks interestCredit for local micro businesses has not been popular; however the majority of the banks will significantly increase credit lines for such companies in future

6 WE PRESENT Privredni vjesnikYear V No 215

T here is a tendency to sug-gest that rural life offers little potential, irrespec-

tive of a wide range of examples in Slavonia and Baranja, such as the OPG Novosel farm, showing the reverse. The farm is located in the Slavonian village of Gat. The farm attracted considerable attention last summer when it won multiple first prizes as the best kulen sausage producer in many major competitions: three gold and one silver medal at four local competitions in kulen pro-duction called kulenijada. Kulen sausage production requires deep knowledge and experience and it is only one of several activities undertaken by the family. “The business was started by my father several decades ago for crop farming but we sub-sequently expanded into cattle farming. Over the past few dec-ades, we have specialised in pig farming and we currently rank as the highest ‘E’ class according to EU standards”, explained Slađan Novosel, adding that the family produces most of the livestock feed for its own requirements over some 30 hectares.

Food as the main tourist attractionThe idea behind Novosel rural tourism originated through de-manding contacts with a large number of people throughout Croatia, Slovenia, Hungary and other countries in the region. “It seemed inconceivable that any-one would opt for a holiday in

a tiny Slavonian village. Never-theless, top quality home-made food, comfortable accommoda-tion, the close proximity of two rivers, as well as a forest, oppor-

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

C alifornia Trade is a typical family business, employ-ing five full-time staff.

The company was founded in 1992 by the Nikolić family, who had previously had wide work experience in Jadrantekstil and Dalmacijavino, both large and once powerful companies. As these companies lost consider-able market share and were in-creasingly affected by the crisis, the Nikolićs decided to venture into entrepreneurship. They signed a contract of co-operation with the Vetropack Straža com-pany, a producer of glass packag-ing, and began distributing their products. During its start-up Cal-ifornia Trade had small orders for several hundred bottles, and cur-rently its annual sales total doz-ens of millions. “We distribute a wide range of glass packaging, equipment and packaging for the production of wine, edible oil, the beer industry, and spirit pro-duction. We also provide a wide range of olive oils, wines, pro-cessed fish products, as well as decorative souvenir bottles. We have an exclusive contract with Vetropack Straža, as well as an exclusive product range of wine corks from Portugal, Spain and Sardinia”, pointed out Rudolf Nikolić, Director of California Trade.

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

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

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

OPG NOVOSEL, VELIŠKOVCI-GAT CALIFORNIA TRADE, SPLIT

One family – three activities600 overnight stays per year mainly due to excellent quality and huge quantities of home-made food

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

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

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

www.privredni.hrBusiness & Finance Weekly 7CROATIAN FOREIGN CURRENCY MARKET

Source: HNB WEEK SEPTEMBER 29, 2012

Currency Kuna exchange mid-rate

AUD 6,018052CAD 5,878439JPY 7,413420CHF 6,158851GBP 9,339032USD 5,757145EUR 7,449746

T he goal of the Financial Business and Pre-Bank-ruptcy Settlement Act, the

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

wants to reduce growing illiquid-ity and prescribe payment dead-lines that cannot exceed 30 or 60 days (depending on the payer), and offers eight settlement op-tions. The banks will certainly take part in the settlement, but this does not mean they will take part in the ownership structure, Bohaček said.He pointed out that the Croatian banking system currently has the highest rate of capital adequacy in Europe and can be regarded extremely safe. It will continue to be safe should the economic crisis continue.

Increase demand for loansHowever, in line with slightly weaker economic movements in the second quarter of this year, the demand for loans decreased as well as bank activity and profita-

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

CROATIAN BANKS ASSOCIATION ANALYSIS

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

24.9. 25.9. 26.9. 27.9. 28.9.

7.46

7.44

7.42

7.40

7.38

7.36

EUR 5.80

5.78

5.76

5.74

5.72

5.70

USD 6.16

6.15

6.14

6.13

6.12

6.11

CHF

24.9. 25.9. 26.9. 27.9. 28.9. 24.9. 25.9. 26.9. 27.9. 28.9.

::: news

Atlantic to refinance €300 million debtAtlantic Group started the pro-cess of negotiating the refinanc-ing of their long-term claims taken over as part of financing the acquisition of Droga Kolin-ska, to restructure the balance and improve financing terms. The planned refinancing of the long-term claims would total a maximum of €300 million and would cover the Group claims in Croatia, Slovenia and Serbia.

Agrokor to issue new bondsAgrokor intends to issue bonds with senior rights of €475 million to refinance existing debt. BNP Paribas, JP Morgan and Uncredit have been selected to arrange the issue. The bonds will be have a life of seven years, or by 2020, in euro or American dollars, or in a combination of both currencies. The planned total amount may be increased, depending on investor interest or the issuer’s decision.

Erste recommends HT stock

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

8 Privredni vjesnikYear V No 215

::: news

Increased tourism revenueTotal financial revenue from tourism generated through ac-tivities in accommodation, food preparation and catering, as well as through travel agencies and tour operators during the first seven months in 2012 totalled €1.67 billion, 3.5% up over the same period last year, according to the data provided by the Tax Administration. Across various categories, the highest revenue was generated by hotels and similar accommodation facilities that generated €0.7 billion rev-enue, 8.7% up over 2011. During the first seven months in 2012 tour operators generated revenue growth of 17%, with camps and camping sites generating 8% higher revenue compared with the same period last year. Tourist resorts and travel agencies gener-ated revenue on par with the rev-enue generated in 2011.

iNavis Maritime Innovation Centre in ŠibenikiNavis Maritime Innovation Centre is opened in Šibenik as a result of co-operation between the city of Šibenik and the Nor-wegian Ministry of Foreign Af-fairs. iNavis primarily focuses on the maritime sector, aiming to provide support for the develop-ment of new products, services and companies. A Norwegian company manages the innovative aspects of the iNavis centre. The opening ceremony also covered several workshops on sustainable business development.

Creativity in tourismEnergo Media Servis Group has given its annual CBTour awards for the most creative and most innovative tourism projects in 10 categories for the third con-secutive year, at the recent World Tourism Day. The Šibenik-based tourism company Solaris was the winner of this year’s competition and received a special award for its significant contribution to sus-tainable development in tourism nationally, the project Dalmatian Ethno Village.

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

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

ploring a wide range of shop-ping opportunities. He stated that: “In a city seemingly built to catch the nuances of an Adri-atic sunset, finding the right early evening place is a serious business” and recommends the elegant Sunset Lounge at the Hotel Dubrovnik Palace, “an elegant hotel bar where pano-ramic windows show the light receding over the Elaphit Is-lands”. In addition, he proposes visiting the Dubrovnik Museum of Mod-ern Art and praises the accommo-dation in the luxury hotels Excel-sior and Bellevue owned by the Adriatic Luxury Hotels Group that has set new standards in the Dubrovnik luxury hotel market. (J.V.)

Siniša Hajdaš Dončić, Min-ister of Maritime Affairs, Transport and Infrastruc-

ture, has recently announced that over €27 million are to be invested in the reconstruction of the Split cruise ship berths. Hajdaš Dončić attended the contract signing ceremony con-cerning the reconstruction of two berths in Split Port worth €4.3 million, financed by Split Port Authority. The reconstruc-tion will provide two 140-metre quays, as well as two 30-metre embarkation/debarkation ramps. The contract was signed by Joško Berket Bakota, the current tem-

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

166 berths and the necessary infra-structure, will consist of five phas-es and will be worth €21.6 million. Hajdaš Dončić highlighted the fact that Croatian motorways have allocated €1.22 million for the construction of the Vis-Komiža road, to be completed by the end of the year. Berket Bakota and Edo

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

INVESTMENT IN SPLIT AND KOMIŽA

€36.9 million for port infrastructure€5.5 million contract to finance the first phase of port reconstruction recently been signed in Komiža

Croatian motorways have allocated €1.2 million for Vis-Komiža road

“36 HOURS IN DUBROVNIK”

Dubrovnik in the New York Times