PV International 0222

pvpvinternationalinternationalCroatian Business & Finance MonthlyEstablished in 1953Monday / 4th February / 2013Year VI / No 0222www.privredni.hr

Damir Novinić, Agency for Investment and Competitiveness In some industries we have a competitive advantage which is visible; the most is in tourism

PAGES 4-5

Energy renovation as an economic promoterEnergy retrofit tenders are currently won by the most cost-effective bidders

PAGES 10-11

Leather and footwear industry Several local companies have been operating successfully against the backdrop of the situation

PAGES 12-13

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

Igor Vukić

T he Russian gas giant Gazprom wants to sell its gas on the Croatian mar-

ket and participate in develop-ing a liberalised Croatian mar-ket, said Aleksandar Medvedev, Deputy Chairman and main de-cision maker of Gazprom after a recent meeting with the Minister of Economy, Ivan Vrdoljak. Med-vedev also announced Gazprom wishes to build a network of fill-ing stations for liquefied natural gas for personal vehicles, busi-ness vehicles and buses. A similar plan was considered by the Aus-trian OMV prior to the crisis, but they did not achieve it, not only because of the crisis, but because of their new strategy. They have focused recently more towards oil and gas search, and less on re-tail. However, Gazprom wants to try out a new approach in Croa-tia. They sold gas to Ina for many years, and now, in line with long-term contracts, they wish to reach the end-user with their products. Medvedev announced that the fi-nal result would be a more cost-ef-fective gas supplier for the public.The first step has already been made. Petrokemija from Kutina signed a contract with Gazprom regarding the annual supply of

130 million cubic metres of gas at a lower price than Petrokemija paid in the past. The contract-ed quantity represents 20% of Petrokemija’s annual demand.Gazprom and Plinacro will build a gas pipeline branch of the South Stream project that will stretch from the Croatian border with Serbia to Slavonski Brod. They also signed a spe-cial action plan regarding this project. The project has a value of €60 million, and each part-ner will finance its own half.

Mladen Antunović, Chairman of the Board of Plinacro, says Pli-nacro will invest €10 million in the subscribed capital and take out a loan for the remaining sum. However, this is not a high-risk project, since Gazprom will rent the entire capacity of 2.7 billion cubic metres of the gas pipeline branch. Gazprom also announced their return on investment would range around 8%.The capacity of the new gas pipe-line shows that Gazprom is ex-tremely interested in market de-

velopment. However, the reasons are certainly not humanitarian. Medvedev announced their par-ticipation in the construction of gas power plants and the produc-tion of electricity, and that they would search for buyers in Croa-tia and the wider region. Analysts predict the price of gas could fall in the future, which is why gas producers look for possibilities of participating in the production of added value with higher prof-its. More information about the projects for producing electricity will be available by the end of the year, Medvedev announced.The construction of the gas pipe-line branch will begin in July 2015 for Croatia. The first gas distribution is scheduled for De-cember 2016. This will provide a safer supply. Along the sup-ply routes through Slovenia and Hungary, it will be possible to obtain gas without mediators at a lower price. This will open the doors to other suppliers, which could result in lower prices.The Russian company is also in-terested in researching gas and oil sites in the Adriatic Sea and on land. The Government should immediately invite tenders for the search for hydrocarbons, and we are ready to participate with a con-crete offer, Medvedev noted.

GAZPROM IN CROATIA

Construction of the South Stream branchThe gas pipeline branch will stretch from the Croatian border with Serbia to Slavonski Brod and is valued at €60 million

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2 Privredni vjesnikYear VI No 222

IMPRESSUM:

Privredni vjesnikKačićeva 910000 Zagreb+385 1 [email protected]

www.privredni-vjesnik.hr/subscription

FOR PUBLISHERNikola Baučić+385 1 [email protected]

EDITOR IN CHIEFDarko Buković+385 1 [email protected]

EXECUTIVE EDITORSAndrea Marić[email protected] Antonić[email protected]

IMC MANAGERDea Olup +385 1 [email protected]

TRANSLATIONLučana [email protected] [email protected]

INTERNATIONAL OPERATIONS Ray [email protected]

Igor Vukić

I nvestment projects over €20 million that could have a positive effect on overall

economic development, will be granted the status of strategic investment by governmental de-cision, and will enjoy all the as-sistance of administrative bodies. This is a summary of the Strate-gic Investment Act the Ministry of Economy has recently pub-lished. This led to a public debate on another tool which Croatia could use to attract foreign in-vestors and motivate local pri-vate investors. The Ministry of Economy proposed this act, and the Ministry of Construction and Ministry of Justice, as well as departments for traffic, tourism, agriculture, culture and environ-mental protection, participated in its drafting. This act will now offer concrete support to invest-ment projects, evaluated Minister of Economy Ivan Vrdoljak.According to the proposal, for each decision regarding a project the Government will indicate its value, the investor’s name and concrete completion schedule. In addition to the investment goal and effects, an explanation of why the project is deemed strate-gic will also be indicated. An op-eration group in charge of project

realisation will also be formed, together with the leader, group members and their individual as-signments. A committee, consist-ing of ministers and other state officials, will prepare decisions for the Government. Certain pro-jects would be selected from the list of strategic projects for which investors could elect themselves or they could be suggested by state administrative bodies.

Study with an idea and assessmentThe act’s proposal indicates that interested investors may be Cro-atia, units of local and regional administration, companies or private individuals. The Gov-ernment itself can issue a public invitation to potential investors

if it evaluates that that would be of state interest. In that case the Minister of Economy would negotiate with the investor. The

Government and the selected in-vestor would conclude a contract that would regulate mutual obli-gations regarding the investment implementation. The proposal for applying for the central list of projects may contain a study with a concept description and assessment of total investment. An overview of administrative and other procedures already conducted in the implementation must be submitted. The relating documents will also have to be submitted (land registry records, ownership certificates, copies of the cadastre plan). The operation group will be assigned to obtain all additional documentation for the project. They have the right to refer to the act that envisaged

that emergency procedures imply that all procedures regarding the implementation and preparation of the strategic projects have priority in the processing of this request. Drafting of documents,

administrative acts and all ac-tions related to the project must start immediately and must be completed within the shortest possible period. The leader of the operation group is responsible

STRATEGIC INVESTMENT ACT

Permits will take For each decision regarding a project, the Government will indicate its value, the investor’s name and a coninvestment goal and effects, an explanation of why a project is strategic will also be indicated

Certain projects would be selected from the

list of strategic projects for which the investors or state administration

bodies could apply themselves

State bodies will take over issuing location building permits and licences for use of strategic projects

(considered as a strategic investment

€20 million

www.privredni.hrBusiness & Finance Monthly 3

(available for economic use

some 100,000 ha (of the country

which is 1,7%

10 dayscrete completion schedule. In addition to the

for coordinating deadlines.

10 day deadlineIt is highlighted that all opinions required for issuing administra-tive decisions must be issued

within 10 working days. If the authorised body fails to do so, the principle of ‘administrative silence’ will apply, and the ap-proval will be considered grant-ed. This would pose a problem

for investors regarding the im-plementation of their projects. In some cases they would have to wait several years to obtain various approvals from local bodies or ministries. It will have to be determined within 10 days whether a project should also include an assessment of envi-ronmental impact. If such assess-ment is required, it would have to be conducted immediately.State bodies will take over the issuing of location building per-mits and licences for use of stra-tegic projects. It will not be nec-

essary to draft detailed schemes of physical planning for strategic projects. This has been the great-est obstacle to investment. Per-mits will be issued on the basis of spatial plans. According to Anka Mrak Taritaš, Minister of Construction, every county has spatial plans, and plans of cer-tain counties and cities were also made. Some of them are not top quality, but they allow the use of space, nevertheless, said the Minister.Since it is expected that many projects will relate to tourism and the coastal area, decision making regarding concessions for mari-time property will be centralised. The Government will be the one to decide, based on present regu-

lations for allocating concessions for maritime property. The State administration will define the border of the maritime property, and the expenses will be incurred by the person who filed a request for this procedure.

Commissioner for SrđThe Government was guided by the recommendations of the World Bank and the results of its survey on competiveness Doing Business during the preparations for the Act proposals. Accord-ing to the latest survey, Croatia ranks 84th in terms of the ease of doing business, and these types of surveys send a clear signal to potential investors. Some recom-mendations from the survey have already been applied. For exam-ple, the project for a golf course construction and tourist complex on Srđ above Dubrovnik has its commissioner in the Govern-ment that will lead the project towards completion. He is Darko Lorencin, Deputy Construc-tion Minister, one of the authors of the proposals. According to Lorencin, all future preparations would be conducted by the pre-sent departments. However, the Government will oversee the im-plementation and provide better co-ordination. For example, to-gether with concessions for mari-time property, the Government will directly allocate concessions for cultural property. In the past, investors were exposed to high risk, since they had to obtain one of those concessions, invest time and money, not certain whether they would obtain the other re-quired concession.

The Government will be the one to decide, based on present regulations for allocating concessions for maritime property

In order for a proposal to be defined as strategic, in addition to the in-vestment amount, it should employ a larger number of people and con-tribute significantly to the development of tourism and the economy. Future export-orientation is a bonus. A project has a greater chance of being declared strategic if it is intended for less developed areas and if it includes important traffic and energy facilities. A percentage of the use of renewable energy is also a positive factor, as well as the imple-mentation of new technology, development of science and higher edu-cation and contribution to re-activating derelict property owned by the state. Any level of monopolistic behaviour is excluded, and strategic pro-jects, supported by the Government, must respect the freedom of mar-ket competition.

Contribution to exports and energy has priority

The Minister of Construction, Anka Mrak Taritaš, says the adopted docu-ments on physical planning envisage new construction on 6.7% of the total surface of Croatia. Around 100,000 ha are free for economic alloca-tion, which is just 1.7% of the country, meaning the area will not be re-constructed. Croatian development requires new energy plants, infra-structure for energy transfer and a more modern railway system. After his helicopter flight over the Adriatic coast, Prime Minister Milanović said the coast was actually not that over-constructed. There are some overcrowded areas, but they are the result of irresponsible local polici-es. Such cases would be avoided with the centralisation of strategic pro-jects in state administration, Prime Minister Milanović evaluated.

New construction enabled


(invested in Croatia by foreign investors

€26 billion (value of projects in the Agency’s portfolio

€4 billion

Krešimir Sočković

O ver the past few years, foreign investors have invested €26 billion in

Croatia. The majority of this foreign direct investment pro-jects were the acquisitions of banks and highly profitable lo-cal companies, when there were actually only a few with vacan-cies. Privredni vjesnik discussed investment possibilities and the problems of investors with the Director of the Agency for In-vestment and Competitiveness, Damir Novinić.

What is the structure of the current foreign investment in Croatia?In terms of investment sectors, this mostly refers to the finan-cial sector, trade and telecom-munications. They are mainly acquisitions, that is, brownfield investment – investing into ex-isting companies. There were very few greenfield investments that start from zero and have the biggest positive influence on the economy or of creating new jobs. During the last 20 years Austri-ans, Dutch and Germans have invested the most, accounting for over half of all investment.

What are the main problems facing investors wishing to in-vest in Croatia?The complex and time-consum-ing procedures as well as their unpredictable duration are the main issues. The second group of problems is related to local ad-ministration participation in big investment projects. Investors often receive different informa-tion at the local and state level.

For a large number of investors, especially those wishing to invest in industrial production, there are much fewer problems.The problems mainly occur with investing in tourism, where own-ership or the allocation of land is particularly problematic. Frag-mented land and parcels, as well as more than one owner is an historical fact. However, some-times investors themselves are not right since some speculated with investment, buying land that is not allocated for what they need. In that case, there is a need to change the spatial documenta-tion and often that will not occur. We cannot help them in that case. According to the Investment Pro-motion Act, we are focused on helping investors searching for a location, project structuring, and together with the investor we go through all phases of their project up to the investment or the mo-ment a factory starts work.

What is our level of competi-tiveness in attracting invest-ment, especially in relation to other regional countries?In some industries, we have a competitive advantage that is visible; maybe the most in tour-

ism since there are some things, like natural beauty, that are im-possible to replicate. They are not a tourist ‘product’ as such,

but a foundation on which a tour-ist product could be built. There is interest now, and I predict it will continue, and even increase. There are areas in industry where we are competitive. The cost of labour is higher than in some regional countries, not to men-tion China or India. However, investors review many factors before deciding where they will invest. They take into account price, quality and availability of work force. Political stability, which will become unquestion-able when we enter the EU, is

also important. Many things that caused problems ten years ago are no longer present. We have a good business infrastructure, the language skills of our people are very good, actually the best, compared with other regional countries, and innovation capac-ity is also very good.When we are preparing offers for investors, we do so according to sector. Everyone knows that we will soon join the EU with a market of 500 million people, but we tell our investors much more. If they are interested in

INTERVIEW: DAMIR NOVINIĆ, DIRECTOR OF THE AGENCY FOR INVESTMENT AND

In some industries we have a competitive advantage which is visible; perhaps the most is in tourism since ‘product’ as such, but they are a foundation upon which a tourist product could be built

Free service for investm

The complex and time-consuming procedures

as well as their unpredictable duration is

one of the main issues

www.privredni.hrBusiness & Finance Weekly 5

the metal processing industry, we advise them on the concentration of related schools, the number of skilled workers and regional know-how. Furthermore, we have many business zones, some of which are strong economic cen-tres. They solved all property and physical planning issues; busi-ness and utility infrastructure are provided, while the prices of land is favourable and competitive. We have been very competitive in offering subsidies to investors after the recent changes to the provisions. In only a few months

since we have been working, we have already had ten large inves-tors who are very interested. Per-haps those companies and inves-tors that have been present longer here and that successfully expand their businesses are the best exam-ples of investment possibilities.

When we enter the EU, we will receive huge global publicity. To what extent can this be re-garded as an opportunity for new investment?This is definitely a great opportu-nity. The Agency is still trying to

gather a team able to accept the increased interest. We are in con-tact with almost all embassies of countries whose investors invest in Croatia. We have prepared two investment visits, in February and April, intended for partici-pants from EU countries. Visits to locations from several eco-nomic branches are also sched-uled for those who are already prepared to invest. I expect this interest will continue and even increase in the future. However, we must be aware that of 100 investors that visit a location,

only two will invest. Investment is a much more complex process than trade, for example. The pro-jects in our portfolio ready for finalisation are worth €4 million. They will certainly be realised over the forthcoming years, how-ever, there are still many inves-tors and projects of which we are not aware. I would like if all big investors who have an idea about investing, would come and talk to us in the initial phase. We will be happy to visit the site with them, help them and vouch for them so the state also would help them.

(investors after visiting a location, invest

2 of 100

COMPETITIVENESS

there are some things, like natural beauty, that are impossible to replicate. They are not a tourist

ent complexities

What is the level of institutional support for foreign investors?During the period of the first investments, the state had an agency specia-lised in promoting investment and providing help to investors. Unfortuna-tely, its work was not continuous. The first agency was founded in 1996, but was shut down four years later. A new Investment and Export Promoti-on Agency was founded in 2002. It started work in 2004; however, it closed in 2010. It was not a good move to shut down an agency that is supposed to attract investment, prior to the crisis. This government recognised this as a problem and changed the Investment Promotion Act, improved subsi-dies for foreign investment and expanded the areas they apply to touri-sm also. It founded the Investment and Competitiveness Agency as a cen-

tral contact and help for investors. We are organised in such a way that we are able to keep a close eye on investor projects. We monitor property-le-gal relations, physical and design documentation; together with the inve-stors, we examine the problems in detail, and predict the course of the in-vestment, on the basis of which we co-ordinate meetings with all bodies of state and local administration that participate on a particular investment project. Institutional support has not been good enough, which, in addition to the crisis, is another reason why there are fewer new investments. Co-ordination for Investment was also founded this year. It will not work di-rectly with the investors, but rather collect information from us on how to improve the business and investment climate.

We keep a close eye on investor projects


Igor Vukić

The working group for in-vestment founded by the government of Croatia has

agreed with Croatian Forests on the delivery of biomass for the Koprivnički Ivanec power plant. Ivan Pavelić, Director of Croa-tian Forests, participated at the meeting and hence the agreement was reached to provide 160,000 tonnes of wood chips for the power plant. Consequently, this investment, which came to a halt two years ago primarily due to the lack of biomass, will finally be imple-mented. The investor in the pow-er plant is E-two-energy having German capital. The investment value is €487 million and the 20 megawatt (MW) power plant will employ 70 staff.

The working group for invest-ment, managed by Ivan Vrdoljak, Minister of Economy, is current-ly discussing around 50 similar projects. The working group has been founded primarily to tackle concrete problems and accelerate the implementation of projects that have already been initiated. A new strategic investment bill concerning projects which will be eligible for special state in-centives is also being considered. Providing an investment is con-sidered of strategic importance,

all the required documentation will be issued within a 10-day period. In the event that does not occur, the principle of “adminis-trative secret” will be implement-ed and it will hence be implied that the authorised body was con-sensual with the implementation of the investment.

Real property fundamentalPrivate investment is considered as the crucial lever for exiting the crisis. Irrespective of the fact that some investors, such as Luka Rajić, manage to achieve a return on their investment (as in case of PharmaS, a pharmaceutical com-pany, or logistics centres), many investors find local administra-tive issues insurmountable. For-eign direct investment has also seen a slowdown; €452.7 million was invested in Croatia over the first nine months in 2012, which is half as much as over the same period of the previous year. Ac-cording to data released by the Croatian National Bank, foreign investment into property totalled €99.2 million, followed by real estate activities standing at €92.2 million. Foreign investment in recreation, culture and sports stood at €86 million, with €74.8 million being invested in whole-sale and intermediation in trade, whilst €71.6 million was invested in financial intermediation. “Foreign investors primarily object to the insubstantial legal framework and frequent amend-ments to regulations”, stated Ivica Mudrinić, President of the Croatian Employers’ Association

Red tape - a major hurdle for investors

INVESTMENT ENHANCEMENT

Private investment asexiting the crisisIrrespective of the fact that some investors, such as Luka Rajić, manage to achieve a return on their investment (as inissues insurmountable

(invested in Croatia over 9 months in 2012

452.7 million

The government has deci-ded to focus on Doing busi-ness, the report released by the World Bank, according to which Croatia ranks 84th in terms of ease of doing busine-ss and concerning investment conditions. Analyses provi-ded by the report and hurdles mentioned will be the principal driver behind the new regulati-ons and will be used in the ac-

tivities of the Working group for Investment, as well as in other initiati-ves for investment assistance. According to Ivan Vrdoljak, Minister of Economy, Croatia has set the ambitious goal to rank 20th in world com-petitiveness survey in several years.

Government striving to rank 20th, rather than 84th

(HUP). He added that extreme red tape adversely affects invest-ment. Investors will opt for coun-tries with propitious investment conditions, rapidly generating the expected return on invest-ment. Mudrinić believes that the recession is not the principal cause of the dire economic situ-ation in Croatia. Problems have been overlooked for an excessive period of time and the crisis has merely highlighted them. Ac-cording to Mudrinić, significant steps need to be taken over the next quarter, such as budget re-vision or amendments to the La-bour Law. Investors need to be provided concrete guarantees to be adequately treated in Croatia.

Commissioner for bureaucratic mazeDamir Novinić, Director of the Agency for Investment and

Competitiveness, stated that state entities would primarily focus on this issue in the near term: high-value investors will be allocated commissioners to provide them with the guidance through administrative jungle.

Consequently, a law has been enacted on the enhancement of investment with substantial fi-nancial incentives per job cre-ated, as well as a large number of regulations to accelerate invest-ment. “We have a broad range of tools to implement these meas-ures, yet we need ample time”, pointed out Novinić.

At the recently held presentation of Irish investment model at the Croatian National Bank, it has been emphasised yet again that low income tax is fundamental for investment attraction. Sandra Švaljek, Director of the Institute

of Economics, believes compre-hensive reforms of the system are an imperative. According to a research conducted by interna-tional institutions, there is cur-rently a relatively simple tax sys-tem in Croatia. Income tax was found to have been substantially lower compared with Ireland and several other competitive coun-tries over a period of time. Nev-ertheless, sadly, Croatia often lacks promotional skills. Darko Lorencin, Assistant Minister for Economy and Investment, point-ed out that foreign investment was primarily attracted by the best Croatian industries and mar-kets such as telecommunications and the financial sector. Investors were in search of the most lucra-tive opportunities. Hence, Croa-tia will be focusing on a strategic industrial policy that will clearly indicate profitable sectors in the long-term. “They will attract most EU funding and subse-quently additionally attract other foreign investors”, concluded Lorencin.


Industrial policy strategy to indicate profitable

sectors

s a crucial lever for n case of PharmaS, a pharmaceutical company, or logistics centres), many investors find local administrative

(invested by foreign owners in property

€99.2 million

The first IKEA department store in Croatia, as well as in the region, will be constructed in Rugvica, at the eastern entry road into Zagreb. The building permit was obtained extremely rapidly – in some 20 working days. Construc-tion will commence in spring. Vladislav Lalić, Ikea Director for Real Estate and Development in Southeast Europe, stressed that obtaining the building permit was the last obstacle to the construction of the department store and hence a tender for a building contractor has recently been invited. “It is anticipated that construction of the faci-lity will last 12 months and the opening of the centre is scheduled for spring 2014”, announced Lalić. It has been highlighted at Ikea that there are expectations concerning the strengthening of co-operation with local compani-es, as well as with suppliers and producers. “Ikea has been co-operating with Virovitica-based Tvin for years and, due to its highly qualified staff, tradition in wood processing and furniture production, as well as its availability of high quality raw materials, there is immense potential for the strengthening of co-operation. We have succe-ssfully completed the negotiations with Croatian Motorways for the construction of a southern access road and on the location of toll booths on the motorway. We would have opted for a more appropriate system, yet we com-plied with Croatian regulations and are focused on remaining in the country. In addition to Zagreb, in the long term we plan to open sales outlets in Split and Rijeka which we believe will be highly attractive locations”, concluded Lalić. The total investment by Ikea will stand at €100 million, and Ikea is anticipating the creation of 350 new jobs and indirectly twice as many. (K.S.)

Building permits dealt with rapidly


(planned for delivery this year

3 to 4 ‘Concept One’ cars

Drago Živković

The development cycle of a new type of car in the automotive industry takes

between three and five years and requires both high investment and risk. A young entrepreneur and innovator, Mate Rimac, is currently facing his turning point, following a more than three-year period of development of his electric supercar ‘Concept One’. The time has arrived for its launch on the market, implying high investment and big risk. Rimac currently lacks funds re-quired for production in Croatia and the major hurdle is homolo-gation, since that requires large-scale investment. “As a result, we are focusing on the provision of developmental services and the sale of components to the automotive industry, as well as searching for strategic partners who will provide the appropri-ate funding level. Meanwhile, we have been producing an ex-tremely limited quantity of spe-cial vehicles that need to pass individual homologation tests in importing countries”, explained Mate Rimac. The first strategic partner will be a currently unnamed Spanish automotive company that has bought the first ‘Concept One’ unit. According to Rimac, long-term co-operation is anticipated. He pointed out that he has cur-rently been focusing on “busi-ness-to-business” co-operation, since it fosters development without the need for production and the direct sale of cars to end buyers. The first unit sold will be delivered during January and the

profit (some €750,000, according to previously released informa-tion) will be reinvested to cover six months of work on further de-velopment. Thereafter, the future is uncertain.

Car engine componentsRimac stressed that he would not give up his ambitious objective of becoming a significant pro-ducer of supercars. Nevertheless, he requires large investment that he is currently unable to provide by himself and consequently needs to sell his know-how and technologies to other companies in order to survive. Hence, he currently sells car engine compo-nents (primarily battery systems and engines), whilst working on the development of further cars for other companies who are en-titled to produce them under their own brands subsequently. He is planning to deliver 3 or 4 Concept One cars this year, with planned annual production dur-ing the car model life cycle is

15 to 20. In addition, every two years, Rimac plans to present a new model whose price will be halved and thus exponentially in-crease market share and capacity. The second product he is relying on is an electric motorcycle and he plans to sell several dozen this year. This was supposed to be a gift to buyers of ‘Concept One’ cars, but has become a separate product.

Negotiations with the Croatian Bank for Reconstruction and Development (HBOR)Irrespective of significant recog-nition achieved globally for the Rimac ‘Concept One’ supercar and its being considered as one of the landmark events in 2012 and referred to as a Croatian prod-uct by Bloomberg, it has not re-ceived any concrete support from the Croatian state. “Unfortunately, the project value has not been recognised locally thus far. I hope this will change in

the near-term”, stated Rimac. He added that he has contacted the Croatian Bank for Reconstruction and Development (HBOR) con-cerning the possibility of financing production capacity expansion, as well as the completion of the pro-ject and the launch of new. Anton Kovačev, Management Board President of HBOR has extended his support and Rimac is hoping to find a solution to his problems, so that his project can remain Croa-tian and he will be able to focus on creating new jobs. Should he suc-ceed, Rimac will be able to retain, perhaps even increase, his current-ly high share of local production with his car. “Almost all the fundamental car components are Croatian prod-ucts and even the tools used in the production of the components have been produced from Croa-tian sub-contractors”, emphasised Rimac. Certain generic compo-nents, such as discs, callipers for brakes, windscreen wipers and safety belts are imported.

CONCEPT ONE AT ITS TURNING POINT

Can Croatian electric car remain Croatian over the long-term?Irrespective of significant recognition achieved globally for the Rimac ‘Concept One’ supercar and its being hailed as one of the landmark events of 2012 and referred to as a Croatian product by Bloomberg, it has not received any concrete support from the state

8


( (inflation in 2013 average rate of current unemployment

3.2% 15.2%

Vesna Antonić

A gradual recovery in eco-nomic activity is pre-dicted for 2013, but real

GDP rate could reach just 0.3%. Positive contributions to growth should come from investment, mainly in the public sector, but also through the export of goods

and services. On the other hand, personal spending will still have a negative effect on GDP con-sidering movements in the la-bour market, a fall in real avail-able income and anticipated further, although slower, debt reduction by households. State spending will also similarly de-crease. The main negative risk for achieving economic growth is related to an ambitious invest-ment programme of public com-panies, as highlighted in the re-cent Newsletter of the Croatian National Bank. Concerning the labour market, the central bank does not anticipate any posi-tive movements this year. As a consequence, the average rate of surveyed unemployment could

increase in 2013 to 15.2%. Un-der the conditions of a further decrease in employment, very mild growth of nominal and a fall in real salaries is anticipat-ed.

Increase in foreign debtA deceleration in the average inflation of consumer prices to 3.2% is anticipated in 2013 un-der conditions of weaker local and imported inflationary pres-sure. Administrative decisions related to EU harmonisation (cancellation of the zero VAT rate and an increase in tobacco duty) will increase the level of inflation however, but to a lesser degree than in 2012. This will have a positive effect on the export of goods and services, which will exceed imports, and the growth of nett transfers from the EU budget could also play a positive role. After a stagnant 2012, foreign debt could con-tinue to increase under the in-fluence of high state debt on the foreign markets. Croatia’s risk premium and expenditure of fi-nancing parent banks are visibly more beneficial than the indica-tors from the end of the second quarter of 2012. This reflected positively on the primary mar-ket for Treasury bills from the Ministry of Finance as well as

corporate debts abroad. How-ever, these movements failed to influence the local interest rate, especially for long-term loans, which has a negative effect on local credit activity. Also, better clients are showing visible signs of substituting local financing with foreign financing. The fall in total lending to companies accelerated even more, point-ing to a trend of debt reduction. The same trend was also visible across the public sector. Con-sidering the high level of cor-porate and public debt, as well as weak business and consumer optimism, the trend of debt re-duction will continue. This is an additional burden that will slow economic recovery. The banks’ slow reaction to improving for-eign financing criteria shows there are limiting factors also on the side of offering loans.

Kuna remains stableMonetary policy will still be based on supporting the stabil-ity of the exchange rate of lo-cal currency to the Euro, and kuna liquidity in the banking system will remain high. In the event of any pressure on the exchange rate, the HNB is ready to respond with foreign currency intervention or other instruments of monetary policy.

In 2013, a mild growth in credit is anticipated due to the con-tinuing negative movements of lending offers and demands, and considering the fact that recent experience has shown that the reach of an expansive monetary policy in terms of credit growth, is limited.According to the state budget for 2013, the total state deficit could reach 5.8% of predicted GDP. The harmonisation of taxes with EU regulations was incorporated in the tax system, which additionally increased the total tax load. It is envisaged that any expenditure increase will exceed income increase, where expenditure for investment and financial recovery of hospitals would increase the most. With such a deficit, the state debt will continue to increase. Although the mood of the market towards countries in emerging markets improved, in Croatia also, such budget movements could cause a deterioration in the credit rat-ing and an additional risk pre-mium increase. The increase of the rate of sustainable growth demands implementation of re-forms that would increase pro-duction and export potential within the economy, and sig-nificantly improve the business climate.

CROATIAN NATIONAL BANK

Rate increase of sustainable growth

demands implementation of reforms

Recovery of economic activity Positive contribution to GDP growth of 0.3% should come from investment in the public sector as well as exports of goods and services


Boris Odorčić

Energy consumption audi-tors in public sector build-ings have recently signed

two-year frame contracts for two regions – Zagreb and Pannonian Croatia. The value of the frame contracts is almost €0.35 million and this marks the start of the en-ergy retrofit programme of pub-lic sector buildings. Energy con-sumption audits and certification are planned for around 300 state-owned buildings with an overall usable surface area in excess of 1,000 m2. An energy consump-tion audit is a prerequisite for the implementation of the Energy-Efficiency Programme and the energy retrofit programme in public sector buildings striving to foster energy-efficiency. Poten-tial energy savings are estimated to be €0.67 million annually due to enhanced energy-efficiency in buildings. Zagreb has opted for joint bid-ders ABACO, the Slavonski Brod-based ALFA-inženjering and the Đakovo-based Inel. The contracted work is valued at €0.2 million.Pannonian Croatia opted for the same joint bidders and the contract is worth slightly over €0.13 million, according to data released by the Centre for Moni-toring Business Activities in the Energy Sector and Investment (CEI). It is important to highlight that energy-efficient renovation in buildings has proved extremely successful as an economic pro-moter in several EU countries. Germany implemented such a programme in over 1.3 mil-lion households, creating over 350,000 new jobs. In Ireland, thermal insulation fitting on fa-

çades – which is one aspect of an energy retrofit programme in buildings – which comprises of fitting of thermal pumps, energy-efficient windows, solar panels and photovoltaic cells – created around 3,000 jobs. Façade retro-fitting in Ireland resulted in annu-

al energy savings of around €450 per household. In addition, Ire-land received a return of €5 per €1 invested. The energy retrofit programme in Ireland clearly showed the fundamental role of political support through legisla-tive framework and incentives.

ESCO emergingDorijan Rajković, President of Croatian Association of Façade Thermal Insulation Systems (HUPFAS), stated that produc-tivity in the construction sector has been declining for over 40 months. “The construction sector is currently considered conten-tious. Nevertheless, this has to be changed, primarily due to the energy retrofit programme. There is huge demand for work, since 80% of buildings in Croatia have not been provided with adequate thermal insulation”, emphasised Rajković during a panel discus-sion entitled ‘Successful Euro-pean Projects of Energy Retrofit Programme in Public and Pri-vate Buildings’, organised by HUPFAS. Ana Pavičić-Kaselj, from the De-partment for Resource Econom-ics, Environmental Protection

and Regional Development at the Institute for International Rela-tions, pointed out the fact that the public sector is merely a small area to tackle. “High-rise resi-dential buildings are a real chal-lenge. Consequently, we have opted for the energy retrofit pro-gramme implementation in pub-lic sector buildings first in order to set an example for residential buildings”, she explained. Nevertheless, in the current situ-ation, energy retrofit tenders do not consider the cost-effective-ness criterion. “Hence, energy retrofit tenders are currently won by the most cost-effective bid-ders who often cannot provide an effective end-result and subse-quently it is not possible to esti-

mate energy savings. Therefore, there needs to be a principal pro-ject guaranteeing energy savings and consumption rationalisation as the sole effective method of the energy retrofit programme implementation”, highlighted Ana Pavičić Keselj, who has un-til recently been Assistant Minis-ter for Energy Efficiency at the Ministry of Construction and Physical Planning. She also high-lighted the specific objectives and obligations of Croatia to-wards the EU, primarily referring to a 20% reduction in greenhouse gas emissions by 2020, a 20% increase in share of renewable energy sources in direct energy consumption, and to become a 20% more energy-efficient coun-

1% annual rate of implementation of

energy-efficient renovation in buildings in

the EU

(created by energy efficiency renovation

from 10,000 to 22,000 jobs

CONSTRUCTION INDUSTRY IS (NOT) A CONTENTIOUS SECTOR

Energy renovation as aEnergy retrofit tenders are currently won by the most cost-effective bidders who often cannot provide an effective en

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s

try compared with 1990.In order to achieve the set objec-tives, the legislative framework has been amended several times. Hence, the Law on Efficient En-ergy Use in Direct Consumption (ZUKE) is encouraging compa-nies in the construction sector to provide energy services (ESCO- Energy Service Company). Dur-ing the last several years, only a few companies applied for and obtained the licence to provide energy services, primarily as a result of an inadequate legal framework and a large number of legal hurdles. “Currently, follow-ing the amendments to the Law, Croatia has seen a considerable number of ESCO companies and the state will provide a model of

work for all those interested”, she stressed.

Energy as fundamental resourceIt should be stressed that ESCO companies are companies pro-viding energy services and imple-menting measures for enhance-ment of energy efficiency on facilities or user areas implying a certain level of financial risk, since the payment of provided services is based on the overall improvement of energy-efficien-cy and other agreed criteria. Furthermore, in addition to the Law on Efficient Energy Use in Direct Consumption (ZUKE), there have been amendments to the overall Budget Law, which

also currently provides favour-able conditions for ESCO com-panies. “We need to boost our industry, encourage solar panel and photovoltaic cell produc-ers, improve façade systems and energy-efficient woodwork, as well as create jobs. In order to enhance energy-efficiency of a 1,000 m2 building, we need 50 staff. Since in Croatia there are around 11,000 public sector buildings, the implementation of energy retrofit programme can create between 10,000 and 22,000 jobs and the required in-vestment is in the region of €119 million”, reiterated Ana Pavičić-Kaselj, adding that a €1 million investment in energy retrofit programme implies the creation or preservation of 19 jobs, whilst the same figure in renewable en-ergy sector is 7.

Adrian Joyce, the Renovate Eu-rope Campaign Director of the European Alliance of Companies for Energy Efficiency in Build-ings emphasised that energy is an essential resource. “Con-sumption and imports of energy are increasing continuously. Each country needs to assume responsibility in order to in-crease energy efficiency and re-duce greenhouse gas emissions, as well as provide an action plan and set specific objectives that need to be achieved by 2050”, he stated. The annual rate of energy renovation in buildings in the European Union currently stands at around 1%. “We have not been informed on whether this implies partial or comprehensive

renovation. What we are aware of is the fact that the renovation rate needs to reach 3% and this level needs to be maintained un-til 2050 which will imply €830 billion for the construction sec-tor yearly”, highlighted Joyce adding that ambitious renovation programmes could create around 2 million jobs.

Non-repayable fundingOwen Lewis, until recently the Director of the Sustainable Ener-gy Authority of Ireland, and Pro-fessor Emeritus of Architectural Science at UCD Dublin, stated that Ireland, which imports 90% of energy and is hence energy inefficient, has initiated the en-ergy renovation of over 1 million buildings. In addition, general public awareness has been raised on the importance of the issue. Moreover, the best system of en-ergy classification of buildings in the EU has been developed. “Building Energy Rating – BER certification has a crucial role in energy retrofit programmes in buildings. Ireland currently holds around 300,000 BER cer-tificates and has hence created a large database. We have also seen a significant increase in the number of auditors of energy per-formance of buildings who enter the required data into the system. In the case that the registered cer-tification does not comply with regulations, the system auto-matically informs the authorised persons who subsequently start with an audit of the collected data”, pointed out Lewis, adding that in Ireland there are also pro-grammes to obtain non-repayable funding in order to encourage the general public to become in-volved in energy-efficient reno-vation of their homes.


Ireland received a return of €5 per €1 invested

(€119 million

an economic promoternd result which is essential as it guarantees savings and rationalisation of energy consumption

required investment in energy efficiency renovation


Sanja Plješa

There are currently 9,000 people employed in the Croatian leather and foot-

wear industry, which is a huge success bearing in mind current local market conditions, since only 8,792 people were employed in large Croatian shipyards at the end of 2011. It is important to highlight the fact that the leather

and footwear sector primarily employs less educated staff and thus reduced employability. Con-sequently, this sector has a signifi-cant social role. Sales revenue in leather and foot-wear industry accounts for 1.3% of total industry revenue and of gross value added. Irrespective of the presence of leather and footwear industries both at local and in international markets, they are primarily export-oriented. “We are anticipating a significant strengthening of the position and competitiveness of the leather and footwear industry following EU accession, since local leather and footwear industry production focuses on keeping abreast with trends in the European Union. Nevertheless, thorough restructur-ing and market repositioning are imperative”, highlighted Zlatko

Rabik, President of the Superviso-ry Board of the Croatian Society of Leather and Footwear Manu-facturers (HDKO) and owner of the Zlatna nit company.

Tradition and market experienceThe footwear industry in Europe is highly developed. It uses a vast range of materials, such as leather and textile fabrics, plas-tic and rubber materials. It com-prises 26,000 companies, with total revenues standing at €26.2 billion, which accounts for 0.5% of gross domestic product in the EU. 388,000 people are directly employed in this sector; two thirds of the total production is concentrated in Italy, Spain and Portugal and there are no large producers. There are 13,900 companies in leather processing and production sec-tor, such as fashion, the automo-tive industry, protection and hob-by products, with a total revenue of €12.6 billion and employing 98,000 staff. Regarding the principal advan-tages of the Croatian leather and

footwear industry on the EU markets, Rabik pointed out the high level of expertise, s k i l l s a n d

professionalism in production, highly developed production

capacities, high quality raw materials (leather from cat-

tle), as well as the geo-graphical vicinity of

EU markets. In addition, a high degree of pro-fessionalism in product d e v e l o p -m e n t ,

(Borovo ann

400,

OUTLOOK FOR LEATHER AND FOOTWEAR INDUSTRY

Leather and footwear sector is primarily export-

oriented, exporting around 70% of the

output

The company that was formerly considered a giant, employing 23,000 staff, has managed to survive. Production at Borovo has been re-launched according to the Management Board. Irrespective of its liabilities, which currently stand at €20 million, the company is anticipating a recovery from the crisis following current restructuring. It will focus on market niches, primarily in special use footwear, in the oil and gas industry, pharmaceuticals, agricultu-re, footwear and bullet-proof vests used by security forces, as well as a wide range of protective clothing for wor-kers for winter, summer and even desert conditions. Borovo is opening stores in Serbia, Montenegro and Bosnia and Herzegovina and will subsequently open representative offices in Russia, the Middle East, South America, Ca-nada and China. Additionally, liabilities exceeding €20 million will be settled in exchange for property, whilst liabi-lities to suppliers will be settled through loan reprogramming and disinvestment. (S.S.)

Borovo: footwear and bullet proof vests for the security sector

Several local companies, such as Varaždin-based producer Bambi, one of the leading childrenbased Borovo, Galko and the fast-growing producer, Inkop, have been operating successfully

Opportunities for succirrespective of hurdles

(in the leather and footwear industry

9,000 people employed


ual production

000 pairs of footwear

flexibility and serial production are similarly significant. Moreo-ver, we have the potential to pro-duce so-called European products, in addition to our long tradition of production and our extensive market experience. Neverthe-less, the leather and footwear in-dustries also have several crucial weaknesses, such as insufficiently developed marketing processes and strategy, low profitability, inadequate capital equipment of local producers, as well as high

production costs. A c c o r d -

ing to R a b i k t h e r e

are several fundamental factors for the success of the

Croatian leather and footwear products in EU markets, such as

high quality de-sign and products, com-petitive prices, commu-nication with customers and successful distribu-

tion channel management.

Croatian products well-known throughout the EUSeveral local companies, such as the Varaždin-based producer Bambi, one of the leading chil-dren footwear manufacturers in Croatia, the Vukovar-based Borovo, Galko and the rapidly growing producer Inkop, have been operating successfully, against the backdrop of the cur-

rent crisis and irrespective of the fact that a large number of companies in this sector have drastically reduce or even halted production. Bambi has over 30 outlets throughout Croatia and currently employs 150 staff. It manufactures children footwear as a result of the advice provided by well-known orthopaedists, bringing together comfort and quality and innovative design. The Borovo factory has been pro-ducing leather, rubber and rubber and textile footwear as well as a wide range of technical rubber products for over 80 years. It has 138 outlets throughout Croatia and Slovenia, with annual pro-duction currently standing at 400,000 pairs of all-purpose foot-wear, as well as 500,000 metres

of V-belts. Galko is a consider-able exporter and is the holder of the Zlatna kuna award for qual-ity, as well as an award for the most successful of medium-sized enterprises. There is also Inkop, currently employing 278 staff. Annual output stands at 200,000 pairs of footwear for export, as well as 100,000 pairs of special use footwear. It produces for the French company Mephisto and its director, Vlado Rafaj, stated that lohn jobs account for just 15% of production.

Top quality design and competitive prices fundamental for success in the EU market

The Croatian Society of Leather and Footwear Manufacturers (HDKO)

has recently marked its 60th anni-versary. Privredni vjesnik talked with Božidar Ledinko, President of HDKO, about the outlook for the leather and footwear industry and about its extensive business experience.

How many companies does the Croatian Society of Leather and Footwear Manufacturers comprise and how successful are they in overcoming the cri-sis?The Croatian Society of Leather and Footwear Manufacturers currently comprises 60 registered members. The overall Croatian leather and footwear sector com-prises 129 companies, of which 120 are small, 8 medium-sized and 1 large. They are all primar-ily involved in lohn jobs. Com-panies with own-brand product lines have been the most se-verely affected by the crisis, as they need to invest in marketing and production. The purchasing power of the general public has weakened substantially against the backdrop of the crisis, con-sumption has been reduced and costs are excessive. 70% of pro-duction is exported, with 90% going to European markets with lohn jobs accounting for 80% of production.

What is the outlook for leather and footwear industry?The current situation is consider-ably complex and difficult, as we

are dealing with a labour-intensive industry and extremely low sala-ries. Leather and footwear indus-tries have been severely affected by the crisis, resulting in redun-dancies and employees resigning over excessively low salaries. Leather and footwear industries are social shock-absorbers due to their revenue and salaries.

How will they position them-selves in the EU?We are optimistic, irrespective of the uncertainties, due to our high quality resources and work-force, as well as flexible produc-tion. Our transportation costs will be significantly reduced following EU accession, freight forwarding will cease, and we will be substantially closer to Europe, which will expand our potential.

Are large international fash-ion chains considered a threat and how interested are they in takeovers or acquisitions of Croatian companies?International fashion chains are a threat, yet I do not believe they will acquire companies in Croatia. They might consider acquiring the better companies. Neverthe-less, it is uncertain whether they will consider acquiring compa-nies involved in lohn jobs or those with own-brand product lines. Large retail chains primarily pro-duce leather items in the Far East. However, I believe it is certain they will be interested in acquir-ing quality local companies with high quality products. (S.P.)

BOŽIDAR LEDINKO, PRESIDENT OF THE CROATIAN SOCIETY OF LEATHER AND FOOTWEAR MANUFACTURERS

Leather and footwear industry as social shock-absorbers

n footwear manufacturers in Croatia, Vukovar-y against the backdrop of the current situation

cess s


Goran Gazdek

T VIN Wood Industry from Virovitica, the most successful and largest

Croatian company in the wood industry, has celebrated their 99th anniversary. The company from which TVIN developed was founded in 1913, when the Association for Casket Manu-facturing built a sawmill. The joint stock company Drach took over the company in 1917 and gradually turned it into the cur-rent company. Through various forms of production organisa-tion, TVIN has been producing state-of-the-art products since that time. Today, TVIN is a lim-ited liability company wholly

owned by former or present em-ployees. They sell almost 90% of their production on the for-eign market (England, France, Germany, Ireland, Belgium and the Netherlands), mainly due to their co-operation with the Swedish company, Ikea.The recession has been putting a strain on production for the last five years, resulting in lower de-mand, but it also taught us how to reduce costs and become com-petitive on the market. Survival is regarded as success in such conditions, said TVIN’s CEO, Ivan Slamić. He added they did not hesitate. At the first sign of crisis, they conducted expert as-sessments and adopted produc-tion restructuring programmes.

12 factoriesThey currently employ 920 em-ployees in 12 specialised TVIN factories in Virovitica, Grubišno Polje, Pitomača and Županja. They are also considering new vacancies in line with their en-visaged investment. We did not downsize. We lost only work-ers who met retirement condi-tions. We did not reduce salaries; a worker who meets the norm earns the same salary as in 2008. However, today we produce in smaller series; we must be faster and more flexible, and the work force must adapt to this. We can raise standards with discipline, work and meeting norms, but workers must understand that, Slamić said resolutely.

According to TVIN, over the next two to three years, they will have to keep an eye on their produc-tion costs and prices as well as quality. Their main goals in-clude technological development and the design of new products adapted to market needs in order to preserve their present capaci-ties until demand increases.In 2012, we upgraded our lac-quer workshops in Virovitica and Pitomača, and we are preparing two larger investment projects to remain at the top. However, we will reveal more when the projects are completed. Only work, re-sponsibility and collectiveness of all of us who regard TVIN as our home will secure a bright future in the EU, Slamić concluded.

E ight Croatian parquet flooring manufacturers were present at the Inter-

national Trade Fair for the Floor Covering Industry ‘Domotex 2013’, held from 12-15 January in Hanover. The presentation was or-ganised by the Croatian Chamber of Economy in co-operation with the Ministry of Agriculture. Pan parket, Parketi Požgaj, Spačva, Mopar, Drvoproizvod, PPS Galeković, Exportdrvo and for the first time DIN Novoselec present-ed their products across 425 m².This has been the most impor-tant trade fair for Croatian par-quet flooring producers for many years now. Companies like Pan parket, Požgaj and Mopar con-

firm the importance of present-ing themselves at the largest and the most fashionable parquet trade fair in Europe, both for companies and branding. Their appearance at this one and other

similar trade fairs, as well as the manufacture of high-quality two-layer and three-layer parquets, these companies have managed to achieve recognition and build a brand in the EU. Using state-of-the-art technology and oak, the most valuable Croa-tian raw material, our parquet producers keep up with the trends on foreign markets, achieving high competitiveness, said Igor Barbarić, Secretary to the Asso-ciation of Wood Processing In-dustry with CEE. Furthermore, companies like Galeković, Spačva, Drvoproiz-vod and DIN Novoselec achieve high sales results for classic type parquets as a result of the world

renowned Slavonian oak.We own an extremely valuable and quality product we can place on any demanding market. In the EU and Germany specifically, local producers sell around 80% of oak parquet that enables us to achieve positive business results. If we could lower prices further, our exports would increase sev-eral times. However, we must not neglect new markets, for exam-ple Turkey and Russia, but must keep up with the trends of three-layer parquets that will open new markets like India or China, ex-plained Zdravko Požgaj, owner of Parketi Požgaj and President of the Wood in Construction Group with the CCE. (P.V.)

TVIN Wood Industry celebrate their 99th anniversary

Survival is regarded as success in recessionary timesAt the first sign of the crisis, five years ago, TVIN conducted expert assessments and adopted production restructuring programmes

Croatian parquet flooring manufacturers’ success at Domotex

Products for demanding markets

(takes foreign markets

90% of production

www.privredni.hrBusiness & Finance Weekly 15

Svetozar Sarkanjac

S ixty years ago Franjo Blažeković, a honey and wax producer, founded his

workshop in Osijek. The tradi-tion of gingerbread biscuit pro-duction and the production of other honey and wax products was successfully passed on to his daughter and her family in 1985. In 2009, Antonija Ranogajec (his daughter) was awarded the status of both artistic and traditional craft by the Croatian Chamber of Economy, which consequently gained wide recognition as one of the best honey and wax work-shops in the country. In addition to the most wide-spread shapes of gingerbread biscuits such as heart, baby and tamburitza, the workshop also creates an additional 30 ginger-bread shapes. Antonija Ranogajec has taken part in a vast array of significant projects and has contributed con-siderably to the intangible Croa-tian cultural heritage with her unique artistic expression and artisanship. A landmark event, an exhibition entitled Ginger-bread Cookies (Licitar) and Honey Production- A Centuries Long Tradition organised by the Zagreb-based Ethnographic Mu-

seum occurred at the time when the craft was faced with severe difficulties. Thereafter it partici-pated at Zoete Zonde exhibitions in Rotterdam, as well as an in-ternational exhibition in Rome. Nevertheless, the highest recog-nition was when the workshop was included on the UNESCO List of the Intangible Cultural Heritage of Humanity.The Blažeković unit has proved that a small craft-centre can even now succeed in preserving tradi-tional values and set an example for future generations, showing that determination and commit-ment are the cornerstones of suc-cess and the idea behind it being deep enthusiasm.

Globalisation stifling traditionIrrespective of the fact that the production of gingerbread bis-cuits (licitars) considerably ex-ceeds the production of candles, due to the predominance of the global market and candle prod-ucts from the Far East, candle-making by Blažeković still continues with hand pouring. Furthermore, candles are embel-lished with stunning wax appli-qués, preserving the traditional production method, as in the case of gingerbread biscuits and

honey cakes. Gingerbread bis-cuits are made from sugar, flour and water. They were once clas-sified as food products, but have metamorphosed into souvenirs or used for decorative purposes. In addition to the principal prod-uct, the Blažeković craft-shop is also engaged in the production of

honey biscuits as final food prod-uct. Nevertheless, they are pro-duced only on special occasions, such as fairs or religious festivals and. In accordance with tradition, they are made solely from chest-nut honey. According to Ranoga-jec, there are only some 20 simi-lar producers in Croatia and only 5 producers have preserved the centuries-long traditional method of production.

Museums as customers The sale of gingerbread biscuits used to be linked exclusively with local festivals and fairs, but are now sold throughout the year, primarily as gifts or souvenirs. Nevertheless, the product is not to be merely placed on a shelf for decorative purposes, since there is an intriguing story in the back-ground. Such biscuits, primarily the heart-shaped style, are a result of a long tradition, craftsmanship and deep enthusiasm - their ma-jor competitive advantages. “Many Croatian museums are our customers, such as the Za-greb-based Ethnographic Muse-um, the Vukovar-based Museum and the Osijek-based Museum of Slavonia, to meet the require-ments of their souvenir shops. Our gingerbread biscuits are sig-nificantly different from classical retail items, as they are a result of long tradition, artisanship and deep enthusiasm. Similar prod-ucts are not usually sold in stores and retail centres”. I prefer to call it “heartfelt economics”, since there is a story, as well as long tradition behind these products which makes them unique. We would not want our products to be classified as ‘usual’ retail items”, pointed out Josip Ra-nogajec.

MORE THAN JUST A CRAFT

Heartfelt economicsOur work and production are based on skills, tradition and deep enthusiasm whilst these and similar products are not sold in stores and retail centres

((licitar) shapes produced by Blažeković

30 gingerbread biscuit

inanc


Sanja Plješa

Following the last year’s suc-cess of the first en primeur tasting of young Malvasia,

the second tasting of young Mal-vasia and Graševina will be held in the Esplanade hotel Zagreb in February. The wine tasting will be organised by associations Vinistra and Graševina Croatica and spon-sored by the Croatian Chamber of Economy, bringing together over 50 wine producers from Is-tria, Slavonia and Podunavlje. In addition, there will be a presenta-tion of the visual identity of the Vina Croatia brand, as announced by Ivica Matošević, President of the Vinistra Association of Wine Growers and Wine Makers of Is-tria. According to him, en primeur tasting of young wine originates from the French regions of Bor-deaux, Burgundy and Rhône.

Graševina as a Croatian wine brandThe idea behind this concept of wine tasting is the presentation of young wine aimed primarily at professionals in the wine industry and gastronomy to highlight the potential of the grape harvest, as well to assist in investment deci-sion-making concerning the pro-duction of various wine varieties. This year the Vinistra Associa-tion was joined by the Graševina

Croatica Asso-ciation, an as-sociation of Graševina pro-ducers from Slavonia and

Podunavlje, p resen t -ing their y o u n g

w i n e s . This tast-ing style is

implemented during a period with few wine events and we are striv-ing to present young wine varie-ties that are yet to appear on the market both to professionals as well as the general public, tourists and visitors. It is simultaneously an opportunity to decide on their subsequent wine orders. Wine re-gions, as well as harvests, differ considerably and hence I believe that buyers and distributors need to be fully advised on our prod-uct range in order to assist their investment decision-making”, stated Matošević. Young wines from the last year’s harvest are ready for drinking in April and May this year and consequently young Istrian Malvasia and Sla-vonian Graševina will appear on the market not earlier than in three to four months time. “The forthcoming en primeur tasting is an opportunity for the joint appearance of two associa-tions of wine producers. Croatia comprises four wine regions – Istria, Dalmatia, Slavonia and Podunavlje, as well as its central part, generally known as “hilly Croatia” and every region has its own association of wine produc-ers and wine growers. All the as-sociations jointly appear on the market, brought together under the Association of Wine Grow-ers and Producers by the Croa-tian Chamber of Economy under the Vina Croatia Brand which we use for our presentation globally”, pointed out Vlado Krauthaker, President of Graševina Croatica Association. He added that Slavo-nia has been recognised as a wine region that primarily produces Graševina, accounting for 60% of overall Graševina production in Croatia. Krauthaker pointed out that the European Union has pro-tected Graševina and thus it has become a Croatian wine brand.

Krešimir Sočković

The company PIP, the larg-est Croatian bee product producer, has recently

opened a new facility in Pisarovi-na, near Zagreb. The investment slightly exceeds €4 million and 30% has come from their own funds with financial support from the Ministry of Science and the Ministry of Agriculture, as well as with a reasonably priced loan from the Croatian Bank for Re-construction and Development and a guarantee provided by the Croatian Agency for Small Busi-ness. The new investment will significantly boost production and increase exports. Exports account for over one third or be-tween 33% and 38% of current revenue that previously ranged between €3.5 million and €4 mil-lion. The main concept behind the new project is the direct link between Croatian honey produc-ers and the market. Hence, pro-duction material for honey pro-ducers, as well as their additional training and the purchase of bee products, product processing and preparation for the market will be provided in the new facility. According to Ivan Bralić, found-er and Management Board ad-visor, the Management Board, the headquarters and production have been relocated to the new facility. “Our technology in this area is the most innovative in Eu-rope. In addition, we have used our local expertise, as all equip-ment in the facility has been pro-

duced in Croatia”, highlighted Bralić. PIP currently employs 43 staff, mainly women and with subsidi-aries in Bosnia and Herzegovina and Serbia it employs a total of 70 people, whilst co-operating with around 800 sub-contractors. The company has employed an additional 4 staff in the new fa-cility and is anticipating the crea-tion of 10 new jobs over the next six months.

Export growthThe company initially launched honey production in glass jars, and subsequently expanded its product range to cover propolis and royal jelly production and has recently included a vast ar-ray of pharmaceutical products. Its broad range of products is its major competitive advantage, ac-counting substantially for recog-nition throughout the region and beyond. “In my opinion, the production of value-added products has been soaring over the past several years. In the case of the Farma-kol project, on which we have co-operated with the Faculty of Pharmacy and Biochemistry, a significant breakthrough has been made both in Croatia and Europe. We have seen consider-able export growth in both in the region and throughout the Euro-pean Union”, emphasised Bralić.The annual output of honey by PIP is slightly below 700 tonnes, whilst production capacity of the new facility is 2,000 tonnes.

( (of Graševina wine produced in Slavonia

60% 2,000 tonne

‘En primeur’ tasting of Malvasia and Graševina

Wine tasting aiding investment decision-making

NEW INVESTMENT FROM PIP

Direct link between honey producers and the market

production capacity of House of Honey

PV International 0222

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