PV International 0223
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pvpvinternationalinternationalCroatian Business & Finance MonthlyEstablished in 1953Monday / 4th March / 2013Year VI / No 0223www.privredni.hr
Eight public-private partnership projects preparedThe size of certain projects is overwhelming for potential Croatian investorsPAGES 2-3
Branko Rogli, CEO of the Orbico GroupUnder such conditions Croatia must be managed as a company facing bankruptcyPAGES 4-5
Minister of Economy Ivan Vrdoljak on the gas marketIn two years Croatia will have the cheapest gas in the EUPAGE 7
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
2008 20092010 2011
According to research conducted by GfK, 2012 saw 32% of households in Croatia not purchasing dura-ble consumer goods against the backdrop of a severe economic crisis. In addition, the number of households spending on goods not classified as those satisfying basic needs is shrinking dramati-cally. There was a 21% fall in consumer spending on culture, entertainment and recreation, 12% on clothing and footwear and a 21% decrease in health care spending per household. As a re-sult, the number of households saving for additional education plummeted by 25% in 2012. In relation to research conducted by GfK a year ago, the figures showing household spending on food, housing, fixed and mobile telephony remained unchanged. Nevertheless, expenditure on food and drink has increased by 9% and housing rose by 5%. Moreover, there has been sub-stantial increase in expenditure, ranging between 4% and 8%, on clothing and footwear, medical services, as well as on tobacco and cigarettes. However, culture and entertainment, mobile te-
lephony and education saw a de-crease ranging between 7% and 10%, whilst expenditure in other categories of products and ser-vices have remained unchanged.By the end of 2012, the average Croatian household disposable monthly income stood at 840, a 5% drop from 881 over one year.
7% of income above sufficient Total household expenditure of 800 is almost identical to that of 2011. Nonetheless, according to a subjective estimate of those questioned, 1,194 is the amount needed to meet the basic needs of an average Croatian household. Irrespective of the fact that 76%
of Croatian households are be-lieved to have below average in-come, there are those who gener-ate sufficient or above sufficient income to meet the basic costs of living and their other require-ments. Thus, 7% of Croatian households stated their dispos-able income is above sufficient to meet the basic needs, although 13% estimated their income to be sufficient to meet their needs.A high income of 939 was found in Zagreb, with the lowest of 704 in Slavonia. Consumer spending on food and drink ac-counts for 33%; 54% of Croa-tian household income is spent to meet the basic existence needs when housing expenditure is also considered.
High cost telephonyAll Croatian households show substantial monthly outgoings on food, drink and housing. These are closely followed by the large number of household outgo-ings related primarily to mobile telephony services (92%) and transport (83%).77% of Croatian households are spending on clothing and foot-wear, with nearly two thirds of households sourcing health care services (62%).
Moreover, 46% of Croatian households show a monthly spending on culture, recreation and entertainment, 45% on to-bacco and cigarettes and 39% on durable consumer goods. Nevertheless, 30% of Croatian households showed spending on education (on average 69 per month).
GfK RESEARCH ON LIVING STANDARDS IN CROATIA
Spending on cars and entertainment decreasing with spending on food and drink upA highest income of 939 found in Zagreb, whilst the lowest was 704 in Slavonia. In relation to the research conducted a year ago, expenditure on food and drink saw a 9% increase, with house expenditure up by 5%
The number of households spending on goods not classified as those satisfying basic needs is shrinking dramatically
2 Privredni vjesnikYear VI No 223
The Centre for Energy and Investment (CEI) has prepared eight public-pri-vate partnership projects worth around 0.32 billion. Tenders for private partners should start in March. Contracts with selected contractors would be signed in the second half of the year when construction could start. This
was stated at the CEI Open Day, during which projects were pre-sented to potential private inves-tors. The presentation was moni-tored by representatives from several foreign embassies, who will provide feedback on pro-jects to potential entrepreneurs in their countries. The size of certain projects is overwhelming for any potential Croatian inves-tors, although the CEI expects the potentially profitable projects could motivate local players to join forces.
Six schools one projectThe largest public-private in-vestment scheduled for imple-mentation, is Justice Square (Trg pravde), a complex of judicial buildings. The construction of this complex would include court buildings and an underground ga-rage and would cost 0.17 billion. Expansion work is envisaged for the General Hospital, worth 40 million. Six schools in the Coun-
ty of Varadin were joined under one project worth 23.1 million. Four schools in Istria would rep-resent one public-private project worth 19.5 million.The Croatian State Archives would be provided with new buildings, a project worth 18.4 million. The Museum of History would be moved to the building of former tobacco factory at a cost of 16.8 million. The neuropsy-chiatric hospital in Popovaa will receive new wards for 16.5 mil-lion, and the construction of two new schools in Dubrovnik will be a project worth 13.6 million. Everyone gains from the imple-mentation public-private pro-jects. Public partners will obtain facilities whose construction will not burden the budget or create public debt, whilst the private partner achieves profit. The CEI invested a lot of effort in prepar-ing these projects, and when their implementation starts, the pro-cess will be unstoppable, pointed out the Minister of Construction, Ivan Vrdoljak, who fully sup-ports Centre employees. The Di-rector of CEI, Dragan Marinko, says the projects were prepared according to a standard method and their implementation will not be affected by political changes. Investors can refer to CEI for information on PP projects and the planned investment of pub-lic companies. Last year, pub-lic companies invested around 1.5 billion, and this year they plan to invest around 2 billion, Marinko highlighted.
Utilisation deadlinesThe Agency for Public-Private Partnership is prepared for inves-tors. Its Director, Damir Jurii,
says they have prepared 11 man-uals with guidelines for imple-menting projects that are avail-able to investors on the Agency website. According to the basic model, the private partner builds and maintains buildings, and the public partner pays the lease. Af-
ter 25-40 years of utilisation, the facility is handed over without a fee to the public partner.The contract regarding the public-private project of Justice Square would be concluded for a period of 30 years. The private partner would build the facilities cover-
The size of certain projects is overwhelming
for potential Croatian investors
EIGHT PUBLIC-PRIVATE PARTNERSHIP PROJECTS PREPARED
Justice Square (Trg pravde), wois in search of a private partnerTenders from private partners should be invited in March. Contracts with selected contractors would be signed durinstart, according to information provided by the Centre for Energy and Investment
( (invested by public companies last year could be invested by public companies this year
around 1.5 billion around 2 billion
Justice Square in Zagreb- tender in March- contract term 30 years- capital value 0.17 billion
Varadin Hospital- tender in May- contract term 27 years- value: 40 million
Schools in the County of Varadin- tender in May- contract term 27 years- value: 23 million
Schools in the County of Istria- tender in May- contract term 27 years- value: 19.4 million
Facility for the Croatian State Archives- tender in June- contract term 27 years- value: 18.4 million
Croatian Museum of History- tender in April- contract term 27 years- value: 16.8 million
Hospital in Popovaa- tender in May- contract term 27 years- value: 16.5 million
Schools in Dubrovnik- tender in May- contract term 27 years- value: 13.6 million
Prepared public-private projects
www.privredni.hrBusiness & Finance Monthly 3
Ina nett profit totalled 0.25 billion in 2012 with revenue coming in at 4 billion, mainly as a result of higher oil and gas prices.According to Board President Zoltan Aldott, Ina significantly increased investment in Croatia during the last year. Total invest-ment stood at 0.17 billion, capi-tal investment in local research and production reached 99.45 million. 30.5 million was in-vested in modernising retail ar-eas, double that of 2011. Last year, the retail segment man-aged to achieve a profit of 2.5 million, despite the crisis and reduced consumption of deriva-tives.Research and Production im-proved business efficiency, and a positive contribution was made by Croscos results in Libya. On the other hand, total hydrocarbon production decreased due to war in Syria and lesser quantities of extracted underwater reserves.
Oil production increased by 8% in Egypt, and oil production in Croatia dropped as a result of over-exploited fields. Refining saw a loss, but improved effi-ciency and achieved higher re-finery margins and a higher share of motor fuel sales (from 60% to 66%).Last year, Ina managed to im-prove its financial situation, de-creasing nett debt 27%, to 0.89 billion. The debt/capital ratio decreased from 38.8% to 30.8% over the year, according to the Ina report. (I.V.)
Last year nett profit or the Konar Group totalled 23.57 million, exceeding their plans by 12.4%, according to the statement provided by them. Total consolidated revenue stood at 0.37 billion, or 4.7% more than in 2011.A total of 0.16 billion in sales revenue was achieved locally, the same amount registered on foreign markets. The most sig-nificant foreign markets include Germany (18.12 million), Swe-den (14.29 million), the Czech Republic (13.39 million), B&H
(10.12 million), Finland (8.71 million) and Turkey (6.88 mil-lion).Capital assets (capital, long-term reserves and long-term ob-ligations) were 72.29 million higher than capital assets and average state of supplies, point-ing to a good resource structure. Konars current assets in rela-tion to short-term obligations are three times higher, and point to solid solvency. We are extremely satisfied with last years results, since we man-aged to operate profitably and increase revenue despite the cri-sis. We must also highlight that the majority of export revenue was achieved in the demanding EU market last year, which con-firms our competitiveness and quality. Konars place on the global market will be secured by continuous investing in employ-ees, development and production technologies, said Board Presi-dent, Darinko Bago. (I.V.)
4 BILLION TOTAL REVENUE
0.25 billion - Ina nett profit
23.57 MILLION NETT PROFIT FOR KONAR GROUP
Profit figures better than anticipated
rth 0.17 billion
g the second half of the year, and then construction could
(usual duration of PPP contracts
25 to 40 years
ing 50,000 m2 intended for four courts and the Judicial Academy. The existing town-planning con-cept solution envisages the con-struction of four main buildings that would be directly connected with a large underground garage that offers the private partner the possibility to additionally com-mercialise the space. The tender should be invited in March and would be based on the principle of competitive dialogue. Accord-ing to the definition, this proce-dure is a dialogue with the inter-ested investors for the purpose of developing one or more ap-propriate solutions that can meet their demands. Such a procedure is somewhat time-consuming so the CEI expects the contract on the Justice Square to be signed in December this year.Therefore, the contractor of new facilities in the Neuropsychiat-ric Hospital Popovaa could be known by July. The tender will be invited in March, and will be managed based on the limited
procedure of public procurement. The contract term is 27 years.
Tender invitations in spring In April, a tender will be invited for a private partner for the re-construction of the building for the future Croatian Museum of History. The contract, with a term of 27 years, should be concluded in August this year. Danijel Kulji, CEI Project Man-ager, says the building permit for transforming the former building of the Zagreb Tobacco Factory (TDZ) into a museum has been obtained. May is scheduled for the tender for schools in Dubrovnik, Istria and Varadin. The contracts should be signed in September. The appropriate decisions of the local administration for project implementation are yet to arrive.The tender for the General Hospi-tal in Varadin will be invited for in May, and the contract should be signed in September. Here, the private partner will be in charge of procuring medical equipment in addition to construction work. New surgery and haemodialysis facilities will be built, and the ma-jority of building permits has been procured. June is scheduled for the tender for an additional facility for the Croatian State Archives near Zagreb. The facility should meet the additional storage needs. The contract should be signed in Octo-ber. The construction work would last two years and the private part-ner would manage the building and collect the lease for a further 25 years. CEI invites potential private investors to gather infor-mation and apply for the tender, since money for the lease has been procured for projects that will be covered by the state budget.
4 Privredni vjesnikYear VI No 223
( (Orbico Group operates company turnover in 2012
17 countries between 820-840 million
Privredni vjesnik spoke with the CEO of Orbico Group, Branko Rogli, on the state of the Croatian economy and plans for his companies that operate in 17 countries. Rogli invested profits in business or production and his companies have never been frozen.
How was your last business year? You opened new mar-ketsEven though we have yet to re-ceive our business results, I can
say Orbico Group registered a turnover of between 820 mil-lion and 840 million. These re-sults do not include our four new markets we opened last year: Hungary, the Czech Republic, Slovakia and Poland. The com-panies in these four countries are undergoing restructuring. The year before, we opened the German and Austrian markets. I am very pleased with that, since we earned a profit of 1.5 mil-lion in Germany. We introduced new brands so are anticipating our turnover to exceed 900 million.
What are the features of the Croatian market?The biggest problem of the Croa-tian market is collection of debts. However, the fact we patched the holes in Hungary from Croa-tia is one cause of our business problems in Croatia. When we
took over the company in Hun-gary, we discovered the signed balance sheet did not respond to the actual one, and that company personnel were incorrectly struc-tured. In addition to problematic debt collection, business in Croa-tia is under the strain of higher VAT and other parafiscal and fis-cal charges. This year I became the full owner of Orbico Zagreb, the original company of the en-tire Orbico Group, excluding our companies in Slovenia and Bos-
nia and Herzegovina. However, despite the crisis we achieve ex-cellent results in some markets. Our profits in Bulgaria, Slove-nia, Bosnia and Herzegovina and Moldavia exceeded our expecta-tions, and that in Germany is ex-cellent in relation to our turnover.
Are you planning any new in-vestments this year?We are planning to complete our investment projects on these four markets. Despite having a
consolidated balance sheet, we are working on consolidating all companies since many things can be done here, within the Or-bico Group and the banks. Also, the debt of the Orbico Group is minimal. Including the invest-ment in these four countries, our debt does not exceed 13% of Group turnover. Our goal is to have a maximum annual debt equal to 4% of annual profits and that we participate in busi-ness with 50% of personal capi-
BRANKO ROGLI, CEO OF THE ORBICO GROUP
The EU will become oWe can increase revenue by bringing in investors, and reduce expenditure only by downsizing public spending. The recovery. It is also poor administration, and when corruption is added, which is everywhere, than we are in a bad situ
Under such conditions Croatia must be
managed as a company facing bankruptcy
What do you, as Honorary Slovenian Consul, think about the dispute over Ljubljanska banka?I have always had a realistic view of this dispute. It should be observed at two levels. It has been revealed that in addition to the claims of Croatian savers, Ljubljanska banka has claims on Croatian companies. The second le-vel is Croatian EU accession. I know for a fact the majority of the Slovenian public want Croatia to join. The claims of Ljubljanska banka on these companies and the debt the bank owes to Croatian savers should be observed at two levels, since the people entrusted the bank with their savings. I am convinced Slovenia will ratify the Croati-an accession treaty and that these disputes will not cause the two countries to jeopardise their friendly relations that have been nurtured for centuries.
I am sure Slovenia will ratify the Croatian accession treaty
tal. This is our goal, and we are not far from achieving it at the moment. Furthermore, these are the parameters of the healthiest world banks.
What will EU accession bring for Orbico?We will be faced with consolida-tion. The EU will become our lo-cal market, and we will be able to rationalise our business and reduce expenditure that will re-flect positively on our business results. Rather than from a ware-house in Hungary, the Hungar-ian market will be supplied from Ivani-Grad. Some companies within our system will be inte-grated.
Is tourism your greatest com-parative advantage?Tourism is definitely our great-est advantage. Of course, we do have others. This includes our stone works that was completely ruined with poor privatisation. We also have wood in which we must focus more on design. Furthermore, we have Slavonia, which is underused. It is not only a granary. We must develop other cultures there as a foundation for products we will export and place through tourism.
What can be done to reduce the known seasonality in tour-ism? How can we prolong the season?I believe Minister of Tourism, Veljko Ostoji, knows the an-swer to this question, and he has already taken very good meas-ures. The recently presented Tourism Development Strategy is very good. We must all work on developing new tourist prod-ucts. We must become more po-lite and try not to turn our great
pride into arrogance. For exam-ple, when you enter an Italian restaurant, you will be amazed by the fact they recognise the person they live from. Croatians behave like owners, which has taken its toll and brought us to the present situation. Everyone drives expensive cars in Croa-tia. On the other, abroad you know exactly who can afford what. We are not modest or ra-tional in either business or daily life. Croatia is a three-four star destination, and we must build hotels accordingly. We must do something to attract the elderly or retired.
What is your comment the credit rating fall? Will the price of capital go up?The credit rating fall will not in-crease the price of capital, and this is the only good thing about it. However, a fall still remains a poor indicator and sends a nega-tive message. To put it simply, this means we will have to take extreme measures in terms of reducing public spending, since the measures so far have not been strong enough. The state must be managed responsibly, just like a company. In this situation, Croa-tia must be managed as a com-
pany facing bankruptcy, which means expenditure must be cut and turnover must increase. Cut-ting expenditure means reducing public spending. I am sorry but there will be wonderful people and workers in Croatia whose salary will reduce. However, the survival of Croatia must be taken into account now. Therefore, I am surprised with the reaction of those who think 5%-10% income cuts will jeopardise the entire system.
What is to be done?If the budget does not stabilise, everything will be at stake. We can increase revenue by bring-ing in investors, and reduce ex-
penditure only by downsizing public spending. The imbalance between public spending and the real sector is not the only thing standing in the way of econom-ic recovery. There is also poor administration, and when cor-ruption is added, which is eve-rywhere, than we are in a bad situation. We have reduced cor-
ruption, but it is still not within normal limits. This is what dis-courages investors. Also, inves-tors have no confidence in our legislative system. Overall, I am not sure a lot can be done now in terms of increasing income, but a lot has to be done in terms of reducing expenditure to create balance between public spending and the real economy. Everyone is warning us about this. Maybe someone will say it is easy for me to talk since I am not at risk, but the fact is I have always taken care of the safety of my employ-ees and my companies have nev-er been frozen.
What is the problem of this government in terms of attract-ing investment?I think they came across larger problems than expected, and this is why they are under time pressure. In order to activate the system, they are making moves faster than they should. This is why mistakes are made. I am not sure whether the higher VAT rate will be a good solution. I think the budget would be higher at the original rate. The structuring of a tax scale is a complex and time-consuming process and it cannot be done overnight.
www.privredni.hrBusiness & Finance Monthly 5
( (anticipated turnover this year Orbico Group debt including investments
over 900 million around 13%
our local marketimbalance between public spending and the real sector is not the only thing standing in the way of economic ation
Investors lack confidence in our legislative system
What is the quality of Croatian managers?To put it simply, I would say our managers are good, and that we should monitor them. We must remember that we spent a long time under socialism where managers thought that they did their share merely by coming to work. Younger managers have been raised by the mentors of those times. Today, work must be constantly developed. To put it simply, this means better results must be achieved at the lowest cost possible. The most successful compa-nies in Croatia are those that have foreign owners or are owned by Croatians who acquired their expertise abroad and have a business vision. Croatian EU accession should bring changes. Entrepreneurs with capital, who have developed their business for generations and know exactly what to do in a given moment, will arrive. It is certain they will use Croatias comparative advantages. They will know how to set up profitable business for their compa-nies in Croatia. EU accession will be an occasion for serious foreign investors who will not only invest, but who will also bring in a new quality business model.
The most successful companies in Croatia are those that are owned by foreigners
6Businesses invested 3.63 billion in fixed assets dur-ing the first nine months of 2012, 2.4% up over the same period of 2011, according to the latest data released by the Finan-cial Agency. It has to be stressed that most businesses did not in-vest in fixed assets during this period but 21,859 or 23.6% of 92,492 businesses reported on their investment in their statisti-cal reports, although 70,633 busi-nesses or 76.4% did not.
Primarily private investment Investment in various sectors by ownership showed considerable variations during the period from January to September 2012. Pri-vate-sector investment accounted for 70.8% of total investment (up by 1.4% compared with the same period in 2011). Investment in fixed assets by state-owned companies increased by 4% and accounted for 16% of the overall total. Additionally, the level of investment reported by other ownership sectors - mixed-ownership sector and co-operative ownership sec-tor - stood at 13.2% of overall total investment. In accord-
ance with the report provided by FINA, investment in fixed assets by businesses according to size, showed large businesses
dominant with 48.7% share of total investment. Their share de-creased slightly in relation to the previous period, whilst the share of small businesses increased, accounting for 37.1% of total investment. On the other hand, that of medium-sized businesses stood at 14.2%. Investment in fixed assets by small businesses
rose 3.9%, large businesses were 2.2% up, although medium-sized businesses saw a drop of 0.6% which resulted in an overall 2.4% increase in total entrepreneurial investment during the first nine months of 2012.According to the investment structure, investment in construc-tion was the most prominent,
(41.7%) and 44.1% in equip-ment. Other tangible and intan-gible fixed assets saw an invest-ment value of 14.2% over the same period, with investment in locally produced equipment rising by 9% over the first nine months of 2012 over the first nine months of 2011. Nevertheless, investment in foreign-produced equipment fell 0.7% during the same period, as did investment into residential buildings (down 0.2%) during the same period, whilst investment in other types of buildings increased 3.2%.
County differences The largest investment was re-ported by investors in four eco-nomic areas totalling 1.93 bil-lion, 53.3% of total investment: in the processing industry it was 0.62 billion (17.4% share), construction industry (0.55 bil-lion or 15.1%), trade (0.48 bil-lion or 13.4%) and electricity and gas supply and steam and air-conditioning supply (0.27 billion, accounting for 7.5% in total investment). Investment in fixed assets in various counties showed noticeable deviations; 9 counties saw an increase and 12 saw a reduction in fixed as-set investment. Zagreb recorded a value of 1.97 billion, (54.4% of total investment), followed by investors in Split-Dalmatia County (0.25 billion and a share of 6.8% in total investment), Is-tria County accounted for 0.24 billion (6.8%), Primorje-Gorski Kotar County (0.2 billion and a 5.4% share) and Zagreb county with 0.16 billion and a share of 4.2%. (V.A.)
Privredni vjesnikYear VI No 223
Private-sector investment accounted for 70.8% of total overall investment
(of 92,492 businesses reported on investment
21,859 or 23.6% (invested by businesses in Zagreb
3.63 billion invested into fixed assetsThe largest investment was reported in the processing industry, construction, trade, electricity and gas supply industry, steam and air-conditioning supply industries
www.privredni.hrBusiness & Finance Monthly 7
There is no reason why Croatia should not have the cheapest gas in the EU during the next two years, Min-ister of Economy Ivan Vrdoljak pointed out during a meeting with the members of the Croatian Employers Association (HUP) held to discuss the Strategic In-vestment Act. However, the Min-ister did not have to put a lot of effort into presenting the benefits of the Act. HUP President, Ivica Mudrini, expressed his support for investment efforts in his wel-coming speech. Let the Minis-ters drag investors by their hands to Croatia if need-ed. But we need more than that, Mudrini said. He added that many unsound regu-lations and exces-sive tax pressures in Croatia do not make it a
country in which to see a sound return on investment.The President of the Associa-tion of Small and Large-Sized Companies within HUP, Petar Lovri, referred to a 930 fine he had to pay when inspectors found a burnt CD in his work-shop. Lovri says inspections have been relentless since the beginning of the year, and com-panies, barely surviving the cri-sis, pay fines for trivial or minor offences.
Profit rather than lossMinister Vrdoljak was asked
how long the price of gas for industry would
be higher than the price for house-holds. I will soon go to Qatar, and would like investment in the LNG terminal to
succeed. Not only because this would
lead to new construc-tion work, but also to
gain diverse resources and stronger compe-
tition, Vrdoljak said.
The gas price of-fered by lo-cal distribu-tors is be-tween 0.31 and 0.57 per cubic metre. The Minister an-nounced the prices will drop when the market
opens. Gazprom representatives also announced an awakening of the market during their recent visit.Croatia already produces two thirds of its required gas. The production price ranges between 0.16 and 0.2. With the new sup-ply routes and new fields coming
on stream, I do not see any reason why a cubic metre of natural gas should not cost around 0.26 in two years time or even sooner, Vrdoljak pointed out.He showed with some examples what will a 30-50% price reduc-tion mean for some industries.Petrokemija d.d. from Kutina pays 0.39 per cubic metre for gas as a production raw mate-rial. The company finished last year with a 24 million loss. With lower prices, this could be transformed into annual profit of 13.3 million. This is money that could be reinvested or for the prices of artificial fertilisers to be lowered, and then every-one will benefit again, Vrdoljak said.
36 small distributorsHrvatska elektroprivreda (HEP), which pays 0.41 for one cubic metre, would reduce their costs. Vrdoljak also pointed to the in-herited problem of too many gas distributers whose costs also af-
fect the price. Instead of three or four larger distributers, Croatia has 36 small distributors, which is not sustainable. Vrdoljak says the Ministry discussed whether there were some regulations that could force them to concentrate, but this is difficult to achieve by decree.
The price of gas will also be dis-cussed with INA representatives, and the Government does not in-tend to sell its share in the com-pany for now.Vrdoljak announced the pro-ject for promoting energy ef-ficiency in building design and construction. The project is running slow due to administra-tive harmonisation, search for financing resources and lack of know-how in planning. It is not enough to copy successful mod-els, like the German. We must take other measures, and I am convinced we will soon reach applicable solutions. When we manage to save energy costs in 30 large public buildings, it will be easier to do the same with private houses. Something simi-lar will happen with the Strate-gic Investment Act. After a few bigger investment projects, the experience will be used to re-alise smaller and medium-sized investment projects, Vrdoljak concluded.
Rather than three or four larger distributors,
Croatia has 36 small distributers, which is not
MINISTER OF ECONOMY IVAN VRDOLJAK ON THE GAS MARKET
In two years Croatia will have the cheapest gas in the EUCroatia already produces two thirds of its required gas. The production price ranges between 0.16 and 0.2. With new supply routes and new fields coming on stream, I do not see any reason why a cubic metre of natural gas should not cost around 0.26 in two years from now or sooner
(cost of each cubic metre of gas sold by local distributers
0.3 - 0.6
8 Privredni vjesnikYear VI No 223
INTERNATIONAL BEEKEEPING FAIR 2013, BJELOVAR
Croatian beekeepers preparing for the EU marketBeekeepers need to primarily focus on retaining the current high quality of products and additionally work on the design and sales promotion, says Martin Kranjec, president of Croatian Beekeepers Association
THE FOOD PROCESSING INDUSTRY FOR THE FIRST NINE MONTHS OF 2012
0.47 billion in exportsAccording to data provided by the Financial Agency, gross profit (revenue ex-ceeding expenditure) generated by the food processing industry over the first nine months of 2012 stood at 123.6 million. 1,434 entrepreneurs employed 44,211 staff, generating total revenue of 3.15 billion, total expenditure of 3.03 billion, and investment of 130 million.The food processing industry (Podravka, Kra, Dukat, PIK Vr-bovec, Ledo and Vindija, to name a few of the larger), managed to
retain its international market share with exports of 0.47 bil-lion with foreign revenue by increasing by 5.9%. Moreover, employment in the food process-ing industry rose by 1.9%, total revenue increased by 3.2%, ex-penditure up by 2.8% and gross profit rose by 11.9% with fixed asset investment up by 4.4%. As a result of a relatively healthier revenue over expenditure ratio, operational effectiveness saw a slight improvement compared with the first nine months of 2011. Companies in this indus-
try are an extremely important, primarily due to their high level of involvement in enhancing employment, production and ex-ports. During the first nine months of 2012 according to the overall results of business activities, the food processing industry ac-counted for 1.6% of overall busi-ness numbers, 5.2% of the people employed, 5.2% of total revenue and expenditure, 4.6% of total exports, 3.7% of gross profit and 3.6% of fixed asset investment. (V.A.)
Beekeeping Fair at Bjelo-var-Bilogora County is the largest beekeeping fair in the region. The 2013 fair covered 120 beekeepers from throughout Croatia, Serbia, Slo-venia, Bosnia and Herzegovina, Finland, France and Austria, at-tracting around 7,000 visitors. Dario Musta, one of the young-est beekeepers, has won many awards. In 2012 his locust honey was proclaimed quality champi-on at the Osijek-based exhibition and his honey biscuits prepared according to the traditional rec-ipe were also awarded. His cur-rent product range covers locust honey, linden honey and meadow honey. I am merely an enthusiast and have been in beekeeping for 3 years. I own 30 hives produc-ing 600 kilos and am planning
to expand and become a profes-sional beekeeper, says Musta.
Austrian experienceIn Austria the state provides hives and queen bees worth 300 for start-up beekeepers and con-sequently there are around 300 new beekeepers per year. Al-most 90% of beekeepers remain in beekeeping and some become professionals. Croatia needs to consider similar measures, ac-
cording to Wolfgang Messmer, an Austrian beekeeper. Due to the high quality of their products and a wide range of innovations, Croatian beekeepers have vast potential in the European Un-ion whose annual imports stand at 200,000 tonnes, highlighted Messmer. Croatia adopted the National Beekeeping Programme three years ago. The state provided 2.4 million for beekeepers in 2012, which is double that of 2011 and it is planning to provide similar funding in 2013 and over the next two following years. We believe beekeeping is an extremely important branch of the economy and are anticipating clustering and the formation of co-operatives. Education is fun-damental, as well as creation and preparation of quality projects in order to foster the absorption of
EU funds, emphasised Tihomir Jakovina, Minister of Agricul-ture.
Beekeeping on the riseAs a result of these measures, last year saw a slight increase in the number of beekeepers and bee-hives - there are currently 9,000 registered beekeepers owning 500,000 hives. It might have even been a result of the reces-sion, as alternative sources of in-come are currently fundamental. There is an increasing number of young beekeepers who have not inherited this business, ex-plained Martin Kranjec, Presi-dent of Croatian Beekeepers As-sociation, adding that beekeepers need to primarily focus on retain-ing the current high quality of products and additionally work on the design and sales promo-tion of honey and bee products.
beekeepers registered in Croatia
9.000(hives owned by them
www.privredni.hrBusiness & Finance Monthly 9
Drogerie markt is a well-known chain store that started to expand in this region when almost no other foreign investor had the cour-age to do so. As a result of this brave move, today it has stores in every larger city in the region. For many years they have been considered the most desirable employer and a store people like to shop at, due to their excellent communication with employees and customers. Their satisfied workers have the highest aver-age salary in the trade sector, and customers always return, thanks to their loyalty card policy offer-ing products at more favourable prices. Privredni vjesnik spoke with Mirko Mrakui, Regional Director of dm (Croatia, Bosnia and Herzegovina, Serbia, and Montenegro) about the compa-nys work in Croatia.
What is the secret of your good public rating?There is no secret. We have been investing in our employees for many years now. Our entire busi-ness is based on the philosophy Here I am a man. Here I shop. Our good mutual relations have to reflect on our customers. And customers have recognised this as well as many others wishing to work for us. Very low staff turno-ver proves we know how to work with people. Al- most 95% of our employ-ees stay with the company for a long period. I am a good ex-
ample of this with my 18 years of experience.
You have been present on the Croatian market for a long time now. Are you satisfied with your position?We registered our company in Croatia in December 1994. dm was the first international trade company that chose Croatia as a country in which to expand, and one of rare companies that be-lieved in this market. We opened our first store in May 1996. To-day we have a total 145 stores in Croatia. Our growth rate was good, not too slow and not too fast, enabling our workers to grow with the company. In the first year, we opened two stores. Then we opened another six, and
then the pace accelerated. Today, we open 8-10 stores a year.
What is the competition like and are you satisfied with your share?The competition is similar to any other activity. This is good for customers, and it keeps us alert. Our share of the entire market of beauty & health products stands at 26%. We have a 77% share in other beauty & health product companies, and are very pleased with this. We are satisfied with our development rate and the fact that the arrival of competition on this market offered our custom-ers the possibility to shop in these stores at lower prices.
What is the quality of your co-operation with local suppliers, and what criteria do they have to meet to be able to place their products on your shelves?Our co-operation with local sup-pliers is extremely good. We work with 76 suppliers and pro-ducers with over 1,300 products, which is almost 10% of the to-tal number of products on our shelves. What we want to do is give each Croatian producer the opportunity to place their product on our shelves; help them posi-tion themselves and obtain better conditions and product presenta-tion. Unfortunately, there are not many Croatian producers of cos-metic products, so few of these products of local origin cannot be found on the shelves. Ever since dm started its work in Croatia, we have been co-operating with a few Croatia companies and grown together as a result.
Can you help Croatian produc-ers to access the regional mar-ket and beyond?We can certainly help them. They can place their goods under their or our brand. Each market is specific, but there are products with potential, i.e. Croatian sea salt, which is sold in the Czech Republic and Slovakia. Croatian products in dm stores across the region are appreciated. There is certainly room for co-operation. If anyone has a product, they should contact us, and we can draft a project. This can include production of olive oil, beauty products or similar. We will do all it takes to realise it.
We have 76 suppliers and producers from
Croatia with over 1,300 product
INTERVIEW: MIRKO MRAKUI, DIRECTOR OF DM
We are delighted to sell Croatian productsWe want to give all Croatian producers the possibility to place their products on our shelves as there is definitely room for co-operation
145 dm stores (their market share of beauty and health products
l-l most 95%
grow with thfirst year, weThen we ope
Corporate social responsi-bility also covers donat-ing; as opposed to spon-sorship, donations are wholly unconditional and hence enjoy privileged tax treatment: in com-pliance with the Income Tax Act, non-cash or direct cash dona-tions up to 2% of annual business revenue are considered as tax deductible expenses. Neverthe-less, non-cash donations are eli-gible for VAT, as such donations are considered non-deductible. Direct cash donations are not eligible for VAT, since financial transactions are not considered as deliveries of goods or ser-vices. The largest corporate donors in Croatia are, naturally, the largest companies and banks. Zagrebaka bank (Zaba) has,
through 14 programmes, donated 2.73 million for 1,139 projects throughout Croatia. Over 400 projects applied for funding last year and 15 projects entered a second round with an initial do-nor value of 1,350. The remain-ing funds up to 100,000 were allocated through Facebook voting by 16,000 individuals. The winners of the official con-test for an original product hav-ing a traditional motif or a prod-uct using traditional craft skills, organised in co-operation with the Croatian Chamber of Trades and Crafts, were also selected in this manner. The product ILI ILI, a pendant lamp, produced by Studio Grupa and designed by Filip Despot, Ivana Pavi and Tihana Taraba, won the first award of 20,000. Zagrebaka bank launched its annual do-nor programme in 2005 and the
winners have been selected via Facebook since 2011. It has not reduced its budget for donations irrespective of the recession and this year the donor level will re-main on par with previous years. INA deminingAmongst a large number of pro-jects and institutions that INA has supported over the last sever-al years, it particularly emphasis-es its long-term partnership with the Association SOS Childrens Village Croatia, which provides welfare services for around 250 children having no parental care. In addition, in May 2011 INA donated funds for demining in Stari Jankovci municipality and in 2012 it provided assistance in demining the area around Petrin-ja. Also, it made a direct cash do-nation to the Intensive Care Unit at the Traumatology Institute of the Rijeka-based Clinical Hos-pital Centre, and a direct cash donation was made to the Clini-cal Hospital Centre Zagreb for the purchase of two devices for the Department of Neonatology and the Intensive Care Unit at the Paediatric Clinic. INA points
out its Volunteer Club that en-compasses some 200 employees gives the company tremendous satisfaction. Since its foundation in September of 2011, Volun-teer Club members have partici-pated in 19 volunteer initiatives throughout six Croatian Counties and Zagreb. They provided assis-tance for the beneficiaries of the Centre for Autism, the Croatian Downs Syndrome Association, the Centre for Rehabilitation, the Croatian Association for Assis-tance to Persons with Mental Re-
tardation, social care homes and kindergartens and also partici-pated in many ecological initia-tives. Applications for donations are submitted to INA throughout the year and projects involving children, youths and people with special educational needs, inno-vation, as well as projects in cul-
Privredni vjesnikYear VI No 223
INA is rightly proud of its Volunteer Club that
encompasses some 200 employees
(total donated by Zagrebaka bank
2.7 million (donation and sponsorship value by HT in 2011
Corporate foundations, which are an innovation in Croatia, are the most widespread channel for donations in the West. The largest and most ac-tive corporate foundation is the Adris Foundation, financed by the Adris Group through 1% of profit made in the previous year. It has so far do-nated almost 3.2 million over the last six years, of which 0.64 milli-on was allocated to the most vulnerable social groups. It donated 0.6 million for scholarships to the most talented pupils and students, 0.08 million for cultural development and creativity, 0.83 million for knowledge and innovation and 0.69 million for environmental protecti-on and natural heritage preservation. It donated slightly over 0.4 milli-on from its sixth round of donations and applications for the seventh ro-und are anticipated in accordance with the usual schedule, at the end of April.
Adris Foundation the most active corporate foundation in Croatia
In compliance with the Income Tax Act, non-cash or direct cash donations or contributions up to 2% of annual business revenue are considered as tax-deductible expenses although non-cash donations are eligible for VAT
Humanitarian projects irrrecession
ture and environment protection, are given priority.
HT and UNICEFThe value of direct cash dona-tions and partnerships with cul-tural, sporting and educational institutions made by Croatian Telecom (HT) in 2011 stood at almost 0.9 million. Modern technology projects, as well as projects in digitisation of busi-nesses, education and humani-tarian projects are fundamental. HT has participated in a large number of humanitarian pro-jects by providing associations with its telephone services. Most HT involvement in humanitar-ian projects is long-term and its employees are also often di-rectly involved. In 2012, and for the seventh consecutive year, it participated in a project enti-tled Together We Are Stronger where 20 projects were selected from 125 applications and each granted a direct cash donation totalling 76,270. This tradi-tional competition for donations to projects proposed by employ-ees will continue through 2013. In addition, also for the seventh
consecutive year, HT is the pri-mary partner of UNICEF in Cro-atia; for the fourth consecutive year, it is the principal sponsor of the Museum of Contempo-rary Art and has continued its co-operation with the Croatian Olympic Committee and the aca-demic community. We partici-pate in such projects to help in problem-solving and implement-ing projects of major importance to the community and society as a whole, pointed out by HT. Irrespective of adverse market conditions, HT will continue to provide support to a wide group of socially useful initiatives.
Mercator providing for childcare homesDonations from Mercator have so far been estimated at several million kuna. Due to the dire economic situation, donations are given primarily to vulnerable social groups, through non-cash donations of food products and
the provision of sup-port to educational projects. In addition to corporate donations, Mercator is also striv-ing to contribute at a personal level. At the end of 2011, its em-ployees rather than in-volving themselves in team building, decided to paint the premises of a Zagreb-based Care Home for the Elderly, in addition to granting it a non-cash donation of Mercator products. Also, last year Merca-
tor employees launched a col-lection initiative of childrens clothes, toys and other items for the Karlovac-based Vladimir Na-zor Care Home. Nevertheless, the donation budget has been considerably slashed as a result of the current economic crisis. However, Mercator has recently made its main donation of over 5 tonnes of fruit and vegetables to childcare homes throughout Cro-atia, simultaneously providing food packs for 90 most vulner-able families throughout Croatia, selected by Social Care Centres.
Holcim involvement in environment protectionFrom 2003 to the end of 2012, the value of donations by Holcim was 1.29 million. Until 2012 the criteria for donations were set in accordance with internal regu-lations on sponsorship and dona-
tion, and beneficiaries were se-lected via tender. Such donations were referred to as sponsor-ship, since the company antici-pated some return service from them. The company supported a broad range of environment protection and sustainable build-ing projects, and in 2009 / 2010 it supported projects dedicated to the suppression of corruption. In 2011 they primarily supported human rights protection projects. The Holcim programme of cor-porate donations won the Indeks DOP award for three consecutive years (2008, 2009 and 2010). It co-operates with the civil sector and the criteria for the selection of beneficiaries are set in accord-ance with the critical events and issues in Croatian society, as well as in compliance with its corpo-rate policy. Over the past several years, as a result of the economic
www.privredni.hrBusiness & Finance Monthly 11
Zagrebaka bank made direct cash donations to 1,139 projects throughout Croatia
(value of Holcim donations from 2003 to 2012
1.29 million (donated by the Adris Foundation
In 2012 the value of donations by Henkel Croatia was 22,500 compri-sing of both non-cash and direct cash donations. It is aiming to select organisations and institutions requiring assistance, and so its donati-ons are most commonly linked to children. In 2012 it made a donation to the Slavonski Brod-based Social Welfare Home for Children and Youths, the Zvono Association for Children and Youths with Developmental Disa-bilities and the SOS Childrens Village Croatia. Henkel has the same do-nations policy at a global level and hence its initiative, launched in 1998, of Make an Impact on Tomorrow. Irrespective of the recession, Henkel has not changed its donations budget during the past several years and donations over 2013 will depend on both requirements in the commu-nity and on planned projects and initiatives. As opposed to other com-panies that have not expressed their stance on the tax treatment of do-nations, it is widely believed in Henkel, that abolition of VAT on non-cash donations is of primary importance.
Henkel: abolition of VAT on non-cash donations essential
12 Privredni vjesnikYear VI No 223
In co-operation with the Cana-dian-Croatian Business Net-work, the Croatian Chamber of Economy (CCE) will organise a Croatian entrepreneurs visit to Canada again in April. After pre-vious business forums and the cancellation of visas between the two countries, economic co-operation is constantly growing stronger. Last year Croatia ex-
ported $68 million and matched imports from the country.New possibilities for co-opera-tion were discussed at a recent seminar How to do business with Canada held by the CCE. Around one hundred representa-
tives from Croatian companies were given data on Canadian in-vestment projects and opportuni-ties that Croatian EU accession will bring. Canada and the Euro-pean Union are about to complete a new agreement that will reduce import duties on 90% of products and should be signed this spring.According to Vesna Trnokop Tanta, CCE Vice President, the high level of Croatian immigrants in Canada (around 250,000) rep-resents a bridge between the two economies. Job vacancies will be opened in the areas of energy, tourism, the wood industry, elec-
tricity industry and infrastruc-tural projects. The number of Canadian tourists visiting Croa-tia is increasing; last year, 54,000 Canadian tourists visited Croatia by October, registering 145,900 overnight stays.
Open to business co-operation with CroatiaCanadian Ambassador to Croa-tia, Louise Larocque, highlight-ed Canada is open to business co-operation with Croatia. The Canadian Trade Commissioner Service in Zagreb provides all in-formation on the markets. Senior
Minister Counsellor at the Cana-dian Embassy in Rome presented the economy of Canada and co-operation potential. Amongst oth-ers, Canada plans to substantially invest in natural resource preser-vation, and US$500 billion will be invested in energy and mining. Around $25 billion will be in-vested in the construction of com-bat ships and the development of merchant shipping. Croatian pro-ducers may apply to be suppliers to this industry. Excellent research results showing new oil and gas sites have transformed Canada into an energy exporter. For this reason, it now has a shortage of pipelines and LNG export termi-nals. The energy market is open; it does depend on political decisions, and the expertise of service pro-viders. There are also many rela-tively simple models for entering other areas of the economy.All additional information on busi-ness co-operation with Canada may be obtained through the CCE, the Canadian business network and many private consulting com-panies.
The high level of Croatian immigrants
in Canada (around 250,000) represents a
bridge between the two economies
CCE TAKES ENTREPRENEURS TO CANADA
Some one hundred Croatian companies introduced to Canadian investment projects Canada and the European Union are about to complete a new agreement which will reduce import duties on 90% of products and should be signed this spring
The Croatian government has thus far been successful in its development of the business and investment climate, as well as in attracting foreign investment, as stated by Kenneth Merten, US Ambassador to Croatia dur-ing a meeting at the American Chamber of Commerce held at the end of February, in Zagreb. Ambassador Merten pointed out the importance of the creation of the Agency for Investment and
Competitiveness that has started operating with considerable suc-cess. He also expressed his utmost satisfaction with the Strategic In-vestment Act and the new incen-tives for investors, as well as with the amendment to the Company Law, as it promotes small busi-ness start-ups. The Strategic In-vestment Act is a significant and positive move, as well as the crea-tion of working groups aimed at tackling investment hurdles. It is
merely a beginning, yet the gov-ernment needs to be encouraged to implement the reforms with more determination, he empha-sised.He highlighted that during the 19th century, Americans showed distrust towards foreign inves-tors, primarily British inves-tors, who opposed to the War of Independence. Nevertheless, that faded and the US has been transformed into a country with
the largest foreign investment inflow, whilst simultaneously retaining her independence. In 2011, American companies with foreign capital provided goods and services worth $670 billion and created many new jobs with above-average salaries. Such trends can be followed by Croa-tia, primarily following the Croa-tian EU accession and the con-tinuation of reforms, stressed Ambassador Merten.
KENNETH MERTEN, US AMBASSADOR TO CROATIA
Assisting foreign investment Ambassador Merten pointed out the importance of the foundation of the Agencyfor Investment and Competitiveness that began operating with considerable success
www.privredni.hrBusiness & Finance Monthly 13
The Croatian National Bank (HNB) has a positive 0.67 billion within the monetary system as a result of which the state can borrow at a record low interest rate level on the local market, and the Croa-tian Bank for Reconstruction and Development can offer an inter-est rate reduced by 2%.
Furthermore, HNB maintains that low inflation and a stable exchange rate aiding all debtors with a currency clause, and by protecting the banks, it also pro-tects local savings. And this is in a situation where 80% of depos-its are in foreign currency. This is all HNB can do to avoid risk-ing more damage than benefit, said Governor Boris Vuji at the 2nd International Conference organised by the central bank. Although he says he is tired of
responding to the same criticism of those who do not even under-stand monetary policy, Vuji refuses to yield to despondence, repeating that only structural re-forms, rather than monetary poli-cy, can help Croatia exit its crisis.The Minister of Economy, Ivan Vrdoljak, agreed with Vuji and referred to past reforms ini-tiated by the Government, and announced a new Construction Act, substantially shorter and simpler than the existing one. Af-ter implementing these reforms, in a few years from now, Croatia will be a small, beautiful and smart country in the south of Europe, Vrdoljak is con-vinced. In order to achieve this goal, the Chief Economist of the World Bank in Croatia, San-ja Madarevi ujster, thinks it is crucial to reform labour laws in order to pro-
tect work instead of working po-sitions. Croatia has a record rate of labour inactivity of men be-tween 25 and 40, she warns. This is partly due to the fact a family of four, with parents
of a lower ed-ucation level, are better of being on wel-fare than on
the labour mar-ket. (D..) This is all HNB can do
to avoid risking more damage than benefit,
COMPETITIVENESS AND HNB
Vuji: By protecting the banks, we protect local savingHNB maintains that low inflation and a stable exchange rate aiding all debtors with a currency clause, says Governor Boris Vuji
Increase in mutual fund assetsMutual fund assets stood at 1.84 billion in January that was 6.53% up in relation to the end of 2012, according to data released by the Croatian Financial Services Su-pervisory Agency (Hanfa). As-sets of funds with public offering stand at 1.79 billion, whilst as-sets of funds with private offer-ing currently total 46.7 million.
Rise in investment in tourismInvestment into Croatian tour-ism is anticipated to reach almost 0.4 billion in 2013, which is double that 2012. In 2013 invest-ment is anticipated to stand at be-tween 0.35 billion and 0.4 bil-lion, which is nearly double the amount invested in 2012 when investment was 0.21 billion.
CEMEX exporting to Libya and IsraelThe Cemex cement factory has operated only for two months over the last two years as a result of the recession. Nevertheless, it has put into operation its rotation-al furnace yet again and now both Cemex factories are currently op-erating at full capacity. The first delivery of over 10,000 tonnes has already been delivered and in addition Cemex is expected to export nearly 200,000 tonnes of cement and clinker to Libya and Israel based on the recently signed contracts.
Organic farming up1,494 Croatian farmers were involved in organic farming in 2011. Nevertheless, accord-ing to currently incomplete data for 2012, the figure has reached 1,757. Organic products are currently grown on 32,000 hec-tares, which accounts for 2.9% of arable land, according to data provided by the Ministry of Agri-culture. In 2011 organic farming output stood at around 18,000 tonnes, with 16,290 tonnes pro-duced on ploughed fields, 1,280 tonnes in orchards, whereas aro-matic herbs, vegetables and vine-yard and olive grove produce ac-counted for the remaining output.
General government consoli-dated gross debt comprising of central government debt, extra-budgetary funds and local gov-ernment debt stood at 23.51 billion at the end of October 2012. The increase is primarily the result of a rise in debt by internal com-ponents, since central government debt reached 0.21 billion, whilst extra-budgetary funds and local government debt saw a monthly increase of 9.5% and 3.8% respec-tively. The external component of public debt was 74.7 million up
compared with September 2012, due to a slight increase in external debt by central and local govern-ment, as well as of extra-budget-ary funds. General government consolidated debt grew by 2.71 billion or 13% in relation to the end of 2011. Central government
debt stood at 22.1 billion at the end of October 2012, 0.28 bil-lion up over the end of September 2012. Extra-budgetary fund debt in October increased by 75.5 mil-lion, reaching 1.2 billion. At the end of October, local government debt, which is a minor component of public debt, stood at 0.24 bil-lion, which implied a monthly in-crease of 8.1 million. According to data released by the Ministry of Finance, general gov-ernment consolidated debt rose in October, accounting for 52.1% of GDP.
GENERAL GOVERNMENT CONSOLIDATED GROSS DEBT
23.5 billion debt
14 Privredni vjesnikYear VI No 223
(in tourism and hospitality industry (7% of total number of those employed)
95,000 people employed
A Croatian tourism devel-opment strategy has been recently devised. This defines the future of Croatian tourism up to 2020. The Strategy itself, developed by the Zagreb-based Institute for Tourism, is to be discussed by the Croatian Par-liament that will also decide on its adoption. It defines guidelines for increasing the competitive-
ness of Croatian tourism, as well as the attraction of investment into the sector. This development strategy is the principal idea be-hind a definition of tourism de-velopment and spatial planning at lower levels of administration in the country. Tourism has a fundamental role in Croatia, in the attraction of new investment, in fostering eco-nomic growth and developing employment. Croatia is aiming to present itself as a tourism-
oriented country. Veljko Ostoji, Minister of Tourism, believes it is imperative for Croatia to rank amongst the top 20 countries by tourism competitiveness in order to be considered a tourism-orient-ed country. He also pointed out that by 2020, and in accordance with the defined vision, Croatia needs to become a globally rec-ognisable tourist destination, a highly competitive country, at-tracting substantial investment, creating jobs and promoting sus-tainable development. Moreover, it needs to foster quality culture, providing visitors with hospital-ity, safety and a unique variety of authentic experiences and activi-ties.
Tourism development and natural heritage preservationOstoji expressed his hope that the document will be of crucial importance for investors, assist-ing them in their ideas and plans concerning tourism promotion. One of the plans is to invest around 7 billion in tourism by 2020, as well as to increase total revenue by around 6 billion. In
addition, we are planning to cre-ate 30,000 new jobs in the indus-try. Consequently, our principal objective is to foster tourism development and simultaneously focus on natural heritage preser-vation, stressed Ostoji.During the presentation of the strategy, several statistical data on the current situation in Croa-tia were highlighted. Thus, there are over 852,000 registered beds, 13% of which are in hotels, 25% in camps, 49% in private ac-commodation and 13% in other types of accommodation. Nev-ertheless, only 40% of Croatian hotels are ranked either 4 or 5-star hotels. According to data released by the Croatian Bureau of Statistics, over 60.4 million overnight stays were recorded in 2011 in registered commercial accommodation and every third overnight stay was in private ac-commodation. Tourism and the hospitality in-dustry employ over 95,000 staff, some 7% of the total number of people employed in the country. Exceptional seasonality is due to production structure and hence 87% of total overnight stays in
Croatia are recorded from June to September.
Operating irrespective of the crisisOstoji pointed out a vast range of problems concerning the com-petitiveness of Croatian tourism, such as insufficient differentia-tion of products and services, the lack of innovative and high qual-ity tourism programmes, insuf-ficient investment and lack of new hotel facilities. Nevertheless, tourism achieved superior results compared with other Mediterra-nean countries even against the backdrop of the economic crisis. In order to achieve its specific tourism development objectives by 2020, improvement of accom-modation structure and quality is essential and hence there are plans for the construction of 20,000 new rooms in hotels, new tourism pro-grammes in camps, investment in 100 new small floating hotels, as well as the upgrading of quality in family accommodation. In addi-tion, tourism consumption needs to be increased to reach 14.3 bil-lion and to record 86 million over-night stays in the near term.
CROATIAN TOURISM DEVELOPMENT STRATEGY DEVISED
Investment in 100 new small floating hotels
Principal objective: to rank in the Top20 countries according to tourism competitivenessCroatian tourism industry is planning to invest around 7 billion by 2020. Revenue is expected to rise by around 6 billion, creating 30,000 jobs in the industry
www.privredni.hrBusiness & Finance Monthly 15
Plastic reconstructive and cosmetic surgery is one of the most important branch-es of medical tourism that could certainly prolong the tourist sea-son. Price is the main reason why so many people decide to have the operation performed outside their own country. CroMedicor portal conducted a survey, and compared Croatian prices of cer-tain procedures to those in Great Britain, Spain, Germany, Italy and Slovenia. They collected the prices of around ten clinics from the mentioned countries, and cal-culated the average price for the most common cosmetic proce-dures. According to the results, cosmetic procedures in Slovenia, Germany and Spain cost almost the same, whilst prices are higher in Great Britain and Italy. For example, the average price of breast lifting in Italy is around 6,200. The same procedure costs less than 3,000
in Croatia. Cosmetic nose surgery costs 4,700 in Great Britain, 4,500 in Italy, and only around 1,500 in Croatia. President of the Croatian Society for Plastic, Reconstructive and Cosmetic Sur-gery (HDPREK), Rado ic, high-
lights that Croatian prices are over 50% lower compared with the EU due to lower prices of doctors and nurses compared with the major-ity of EU countries.
Huge differencesThe average prices of various minimally invasive procedures and operations depend on whether they are performed in Croatian private surgeries, clinics or hos-pitals. The price range varies since procedures which are sig-nificantly different from one an-other are represented under the same procedure. For example, with liposuction this can include removal of excess fat tissue on one or several areas of the body, therefore the complexity and du-ration of the procedures are differ-ent, ic said. He added that some procedures are performed under a local anaesthetic and others with general anaesthesia, which also defines the price. In Croatia, li-posculpture, aspiration and/or transplantation of fatty cells rang-
es between 1,350 and 3,300, and blepharoplasty (correction of eyelids) costs between 890 and 1,900. Otoplasty (correction of ears) costs between 800 and 2,100. Abdominoplast or tum-my tuck ranges between 2,800 and 4,000. Face lifting costs be-tween 1,600 and 4,000. Prices for breast enlargement depend on the type of implants or operation procedure.
Co-operation with insurersic says there is a huge underused area for other reconstructive pro-cedures performed by licensed, reconstructive and cosmetic sur-geons. In compliance with EU practice, reconstructive proce-dures can be covered by health in-surance even if they are performed in a foreign country if the price is not higher than the price offered in the patients own country, ic said. Therefore, when Croatia enters the EU, there will be more room to ne-gotiate with insurance companies from the EU, ic said.
Average price of breast lifting in Italy is around
6,200. The same procedure costs less than
3,000 in Croatia
Cosmetic surgery to prolong the tourist season
Only in Croatia: beauty at half the pricePrices of reconstructive and cosmetic procedures in Croatia are over 50% lower than in the EU. Patients who choose Croatia for the operation, will be able to do so at the expense of their health insurance after EU accession
( (Cost of cosmetic nose surgery in Great Britain for the same procedure in Croatia
4,700 around 1,500
According to the recently adopted Regulation on fees for registering ships, yachts and boats in the register of ships, yachts and boats, fees for the first registration of boats of up to 7 metres in length current-ly stand at 13, whilst for those exceed-ing 7 metres in length fees are 133.
Fees for the initial registration of yachts have decreased and in-stead of the previously charged 1,330 and 3,330, owners of
yachts up to 24 metres in length will be charged
533, with fees for yachts over 24 metres
being 1,100, irrespec-tive of whether they were
constructed in Croatian or foreign shipyards.
In addition, fees for the registra-tion of ships with a gross tonnage exceeding 10,000 tonnes, (which previously stood at 13,300), cur-rently stand at 3,330.The Regulation entered into force on the 5th February 2013 and re-places the Regulation on fees for registering ships, yachts and boats in the register of ships, yachts and boats dating back to 2006. Fol-lowing co-ordination between the
appropriate ministries, and the definition of registration proce-dures, from 31st May owners of vessels temporarily imported into Croatia have been charged VAT at a rate of 5% and a more favoura-ble customs duty. Comprehensive information on the procedures and registration has been published on the website of the Ministry of Maritime Affairs, Transport and Infrastructure. (J.V.)
LOWER FEES FOR PRIMARY REGISTRATION OF YACHTS
New fees and charges for vessel registration
16 Privredni vjesnikYear VI No 223
Representatives of the Chambers of Economy from Croatia, Mac-edonia, Bosnia and Herzego-vina, Serbia, and Montenegro launched an initiative for a joint brand, a regional tourism brand to embrace the best features of each country. A working group is expected to be created as announced during the round-table discussion enti-tled South-Eastern region on par with Europe at the Belgrade-based 35th International Fair of Tourism organised by the Ser-bian Chamber of Commerce. The working group will focus on a South-Eastern Europe tour-ism product aiming to adapt it in order to attract third country markets, primarily to the increas-ing number of tourists from Asia, mainly China and Japan, as well as from South America. Zoran Novakovi with the As-sociation for Tourism and Hos-pitality of the Serbian Chamber of Commerce pointed out the importance of the recently held meeting in Tirana organised by GIZ where it was concluded that the co-operation of seven chambers of economy (Albanian Chamber of Commerce being the seventh), is fundamental for the implementation of the project of presenting South-East Europe as a newly-discovered destination to the global market.
Croatia as a partner in EU projectsAccording to Dragana abi, Secretary of Tourism Association at the Serbian Chamber of Com-merce, tourism industry results show significant variations, with Serbia currently seeing a fall-off in domestic tourism, whilst simultaneously record-ing an increase in the number of arrivals and overnight stays by foreign tourists. In addition to emphasising the crucial role of a unique regional tourism prod-uct, Dragana abi pointed out the fact that the participating countries are CEFTA members and also highlighted the impor-tance of the forthcoming Croa-tian EU accession on 1st July 2013. We are expecting to become a fully-fledged member of the EU on the 1st July 2013, which will make us an important partner in
EU projects throughout the re-gion, stated Leila Krei Juri, Director of the Tourism Depart-ment at the Croatian Chamber of Economy. She stressed that according to analyses of the global tourism market, it is an-ticipated that Europe as a whole
will see stagnation in the near term. Nevertheless, South-East Europe will see growth. A joint brand will foster tourism growth of between 6% and 8% in the area, according to Leila Krei Juri.
Meugorje, a religious tourism centreMirko Bokovi, Secretary of Tourism Department at Foreign Trade Chamber of Bosnia and Herzegovina stated that Bosnia and Herzegovina is planning to contribute substantially to the pro-ject and he pointed out Meugorje as a religious tourism centre for the whole of Europe. Tourism is considered of primary importance in large countries and the entire region of former Yugoslavia is a rather small tourist market. Conse-quently, joint appearance on third markets is imperative, opined Bokovi. Sanja Markovi, Secre-tary of Tourism Department at the Chamber of Commerce of Mon-tenegro, stressed that Montenegro provides tourists with a remarkable opportunity of skiing and sea bath-ing in the same day. Moreover, rep-
resentatives of the Croatian Cham-ber of Economy presented Istria as a unique South-European product, comprising of a vast array of his-torical, cultural and traditional events and a rle model for a joint brand in South-East Europe.
Regional Chambers of Economy announced the launch of a joint brand at the International Fair of Tourism in Belgrade
The Balkans as a single tourism destinationRepresentatives from Croatia, Macedonia, Bosnia and Herzegovina, Serbia, and Montenegro launched an initiative for a regional tourism brand to attract tourists primarily from Asia, Russia and South America
Istria presented as a unique South-European
product and a rle model by representatives of
Croatian Chambers of Economy
1,000 exhibitors from 46 countries throughout the world, including Croatia, participated at the recently held 35th International Fair of Tourism in Belgrade. The Croatian National Tourist Board pre-sented tourism programmes provided from Istria to Dubrovnik, emphasising the immense potential of Croatian continental tourism. Croatia has par-ticipated at the Belgrade-based International Fair of Tourism for the fourth consecutive year. Serbi-
an tourists opt for their desired holiday destinati-ons primarily via the internet and are mainly indi-vidual tourists arriving by private vehicles opting primarily for beach holidays. Furthermore, there are many tour operators in Serbia providing bo-oking services for holidays in Croatia, explained Slavija Jaan Obratov, Head of Department at the Croatian National Tourist Board Main Office. Croatia has seen an increase in the number of
tourists from Serbia over the last several years and 99,055 Serbian tourists visited Croatia and 606,727 overnight stays were recorded in 2012, a 6.2% increase in arrivals and 12.4% in overnight stays in relation to 2011. We are anticipating the results for 2013 will be on a par with those last year. In addition, we expect to see over 100,000 Serbian tourists this year, concluded Slavija Jaan Obratov.
100,000 Serbian tourists anticipated