june 14th

01

southeast europe · a fortnight in review

no.09 / subscription only / 14th june 2012

the economy / From Austerity to Affluence?

in the margin / The Serbo-Greek Umbilical Cord

/ M & A in Pre-EU Croatia

technology / A Brief Walk through…‘Cloud’

feature / Croatia: New National Bank Governor and the Eurozone Future

GREEK FIRE

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content

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24

20

32

44

fortnightly feature

in the margin

m & a

the economy

technology

event horizon

eu accession

politics

editorial

to do list

good ftuff

destinations

introductory epistle

06

08

10

12

18

20

24

32

28

36

40

42

44

48

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The Economy

Of General Interest

Greek Fire

fortnightly news

Croatia: New National Bank Governor and the Eurozone Future

The Serbo-Greek Umbilical Cord

Slovenia: From Austerity to Affluence? Not Quite Yet.

Mergers & Acquisitions In Pre-EU Croatia

The State of the World Economy

A Brief Walk through…‘Cloud’

The Man of Two Oaths

A Bosnian Reshuffle

Montenegro: The Beginning of a New Chapter

Sveti Stefan: Crown Jewel of Montenegro

Tech & Trendy

june 14th

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It may be true, as Peter Frankopan, Director of the Centre for Byzantine Re-search at Oxford and the author of “The First Crusade: The Call From the East” said in a recent article published by the New York Times, that Athens now as Constan-tinople during the time of the Crusades became addicted to easy money provided by the West, their greedy and irresponsi-ble dealer; it may also be true that in ei-ther instance the lending led to some sort of demise on a grand scale; but it is un-doubtedly true that the Greeks had better sober up and rise to the occasion, or else…

Greek Fire

introductory epistle

The above title is no mere pun, but an actual incendiary weapon used by the Byzantines to great effect, usually in

naval battles. The exact ingredients of the cocktail represent a secret that has been lost in the dark and violent recesses of (Balkan and Levantine) history, though it is usually speculated that this devilish invention, which could continue burn-ing while floating on water, involved the mixing of naphtha, quicklime, sulphur and nitre. And God knows what else.

A thousand-odd years later, the Greeks seem to be in the chemical or mixology business yet again, although this time they are not experimenting with flamma-ble potions and materials, but rather with the stuff that societies are made of. The repeat parliamentary elections mere days away, they have traded in sulphur for fis-cal irresponsibility, nitre for suspect work ethic, quicklime for high nationalistic passions, naphtha for stubbornness. As before, all the ingredients of this destruc-tive power, threatening to disrupt the en-tire financial system of the Old Continent (and consequently the whole world), may forever be lost to posterity.

editor-in-chief

Igor Dakić

executive editor

Lee Murphy

lee@see-magazine.eu

graphic editor

Ivor Vinski

art editor

Stiv Cinik

country editors

Miša Milošević (Serbia)

Aida Tabaković (b&h)

Sebastijan Maček (Slovenia)

Miroslav Tomas (lifestyle)

issn 1848-4107

impressum

contributors

Dylan Alexander (Permanent)

Jerko Markovina (Permanent)

Ivan Bilić (M & A)

Stephen Young (Editorial)

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Shutterstock, IStock, Wiki

Commons unless otherwise

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we can only imagine the dark apotheosis.Let us just look at the surface, with the

immediate region in mind. Slovenia is a member of the Eurozone, and so is Mon-tenegro, unofficially. As for Serbia, Greece is to this country one of the main sources of fdi, whilst Croatia, should the Greeks persevere, can expect to see even more trouble for its already massively troubled shipping and shipbuilding industry. The Bosnians, delicate as they are, can hardly afford another disruption – of any sort – and we could say, if we wanted to be wick-ed, that only Macedonians stand to profit from an even further weakened Greece, as this might give them a bargaining chip in the long standing name dispute. But even the Macedonians – the sane ones, that is – know that Greece is one of their principal trade partners and that this fact far over-shadows any romantic notions and much abused populist platforms.

Indeed, Greek fire...may it not strip us of the pleasure of indulging in those wonderful and fast-approaching summer pursuits. I, for one, solemnly proclaim that I truly deserve a decent holiday. Per-haps even in Greece...less the fire.

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fortnightly news / the economy

With the rapid loss in value of the Serbian Di-nar it was never going to be long before the IMF made their views known: Bogdan Lissovo-lik, the IMF Permanent Representative in Ser-bia, has stated that Serbia is in need of fiscal consolidation and must give more focus to their efforts to address their balance of pay-ments deficit. “Structural reforms imply cre-ating conditions for attracting foreign di-rect investment, primarily in manufacturing and export-oriented sectors,” said Lissovolik.

Limpio, who produce paint and plaster, have opened a new plant in Lukavac, B&H, in an investment worth over 1.5 million Euros. The completely automated production facility will employ 30 workers and will have a daily out-put of 100 tonnes. The plant will produce a wide range of products, from decorative stuc-co and façade paint to construction adhesives and mineral plaster. Limpio started life back in 1989 as an importer of building materials but soon moved into production. Exports to Croatia account for almost 34% of their business.

That Turkish Airlines had announced they were withdrawing their management team from Bosnia and Herzegovina was news in and of itself. That this was in relation to B&H Air-lines was a revelation very much unexpect-ed. For all intents and purposes B&H Airlines has been defunct for a number of weeks al-ready, and it is expected that Turkish Airlines will seek to rid themselves of their 49% hold-ing. It is unlikely that B&H Airlines will be able to maintain any semblance of independence should that stake be purchased by a larg-er carrier, be that carrier national or regional.

Erdal Trhulj, the Bosnian Minister for Energy, Mining, and Industry, has stated that as soon as the Federal Concessions Act is passed the State will be publishing a public tender for var-ious mining operations throughout the terri-tory of B&H. European industry, the Minis-ter explained, currently has a demand for a number of different metals, 14 of which can be found in B&H. Mining of these metals had been discontinued at various stages between the 1930s and the 1960s due to a decline of value on the International markets. Bakovići Mine is a site that will draw the most atten-tion, as it is estimated that it still holds some 4.2 tonnes of gold and as much as 6 tonnes of silver. At current prices that would amount to over 300 million Euros, something the B&H economy can hardly afford to forfeit.

After an absence of 21 years Croatia Airlines has announced that they will be beginning flights connecting Split and Belgrade. The flights are scheduled twice a week, for Mondays and Fri-days, but are still in a trial phase up until Sep-tember, or until the end of the tourist season. Croatia Airlines have stated that this trial pe-riod is meant to gauge interest for prolonging the route, but also to see whether a route be-tween Zagreb and Belgrade might be feasible: an inter-capital flight has long been sought af-ter by the business community. The flights be-tween Split and Belgrade will be serviced by a Dash turboprop which can seat 76 passengers.

In a week when Croatia unveiled its new util-ity vehicle, Rasco’s MUVO, there remain se-rious question marks as to the future of the car market in the country. According to Euro-pean-wide figures the Croatian market is one of the worst, with just over 2,600 cars be-ing sold during the month of April, a 37% de-crease on the same period in 2011. This de-crease means that total sales for 2012, to date, have fallen below those of 2011. This pattern is being repeated across Europe with sales for 2012 totaling some 340,000 fewer ve-hicles than in the same period in 2011. Mer-cedes are the only car producer to have re-ported a significant rise in sales so far this year.

The Croatian Chamber of Commerce (HGK) recently hosted two business meetings: the Croatian-Chinese business forum attended by a delegation from the China Council for the Pro-motion of International Trade (CCPIT) and the Croatian-Turkish business forum attended by Turkish textile companies, which was organ-ised by the Association of Exporters of Textiles and Clothing from Istanbul. The Turkish dele-gation said that as many as 17 companies were looking at expanding into the Croatian market. Similarly, the Chinese see Croatia as being an attractive market. “Croatia occupies an impor-tant geographical position, has valuable water resources and forests, and particularly devel-oped tourism, which can be important for at-tracting Chinese investment. It is also impor-tant to develop cooperation by linking SMEs, and to encourage mutual investments,” said Dong Songgen, Vice-President of the CCPIT.

the imf gives their opinion on serbia

limpio opens plant in lukavac

death knell for b&h airlines

b&h to give out mining concessions

direct flights from belgrade to split

car sales market in jeopardy

possible investment on the horizon for croatia

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It is being speculated that a public tender for the sale of the Slovenian carrier Adria Airways will be published towards the end of June. BDO Revision, an auditing firm, have been con-tracted to perform a survey of Adria's assets, especially AA assets such as hangars and the newly constructed airport building at Brnik Airport. All business agreements will also be examined. Adria Airways, along with other carriers in the region, recently rejected a EU proposal to merge and form a larger brand.

As Serbia still waits to learn who will be part of the new Government, it seems as if the currency, the Serbian Dinar, cannot stabi-lise. Despite the Serbian National Bank sell-ing off almost 70 million Euros the currency has continued its slide and is now trading at over 116 RSD to the Euro. Serbia has sold off 1 billion Euros since the turn of the year, but this has done little to arrest the currency's inexorable descent. It has been widely sug-gested that it is Nikolić's victory in the Presi-dential campaign, as well as the lack of a Gov-ernment, that has caused the International markets to shy away from the Serbian Dinar.

The Port Authority of Kotor has become a mem-ber of Medcruise, an association of port au-thorities of various cruiser destinations in the Mediterranean, the European Atlantic, and the Red and Black Seas. Dubrovnik had proposed Kotor’s entry and, clearly, as the largest cruiser destination in the Eastern Adriatic, their opin-ion held sway. As part of Medcruise Kotor can now expect to see a rise in tourist numbers as it plays host to regular cruise visits by all the major companies operating in the region.

In response to a reported 1.3% decline in Croatia’s GDP during Q1, Moody’s have down-graded the country’s outlook from stable to negative. Moody’s have explained their deci-sion by highlighting Croatia’s dwindling eco-nomic growth, declining exports, and the failure of the State to implement any mean-ingful austerity measures. The Eurozone cri-sis has not helped matters and has impact-ed on the Croatian economy. Moody’s is the last credit rating agency to downgrade the Croatian outlook as Standard and Poor’s and Fitch have already altered their esti-mates earlier this year. Moody’s have left the Croatian credit rating unchanged at BAA.

A shareholders meeting of Abanka Vipa has approved the appointment of a new supervi-sory board, and has also adopted a proposal to increase the bank's core capital, by 50 mil-lion Euros, through a new stock issue. This new supervisory board will see the appointment of Andrej Andoljšek (of Sava Insurance), Kristina Ana Dolenc (formerly of New Ljubljana bank), Andrej Harzabet (former board President of NKBM), and Andrej Slapar (of Triglav Insurance). The stock issue was opposed by a number of shareholders who see it as being against the interests of their portfolios. Abanka Vipa re-ported a loss of 119 million Euros during 2011.

Imlek, a dairy based in Belgrade, together with Mlijekoprodukt, from Kozarska Dubica in B&H, have concluded a deal worth 8 million Eu-ros whereby they take control of Natura Vi-ta, a Bosnian dairy from Teslić. This deal will confirm Imlek as one of the leading investors in the dairy industry. Already Imlek have in-vested 20 million Euros into Mlijekoprodukt and they own several dairies in B&H, Ser-bia, and Macedonia. Their combined output totals over one million litres of milk per day.

The management of Belgrade's Nikola Tes-la Airport has scheduled their annual share-holders meeting for the 28th of June. At the meeting the shareholders will be presented with information relating to the airport's busi-ness plans for 2012, as well as financial re-ports for 2011. There will also be a vote on a new pricing structure which will include re-duced rates for carriers using the Serbian cap-ital's airport. Although Nikola Tesla witnessed a decline in profits – over 29% when com-pared to 2010 – dividends may yet be paid out, which is another thing to be decided at the aforementioned shareholders’ meeting.

Italian firm Acciaierie Bertoli Safau (ABS), a part of the larger holding company Danie-li, has bought the Sisak Ironworks for 30.4 million Euros from U.S. Company CMC, which owned the works since 2007, during which time they invested 200 million Euros into the reconstruction of the production facilities. Danieli have bought the grounds, steelworks and rolling mill, with the exception of cold-forge facilities which remain in CMC’s owner-ship. Danieli is one of Italy's largest industrial consortiums, their annual revenue exceeding 3 billion Euros. They are also well acquaint-ed with the facilities in Sisak, since it was they who supplied the machines used in the modernisation of the ironworks under CMC.

adria airways up for sale?

lack of government part of currency's problems

montenegro becomes part of medcruise

moody's downgrade croatia's outlook

new supervisory board for abanka

imlek buys out natura vita

shareholder convention for belgrade airport

danieli buys sisak ironworks

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fortnightly news / of general interest

Vladimir Putin, the Russian President, recent-ly spoke with his newly elected Serbian coun-terpart, Tomislav Nikolić. A 150% growth in economic exchange, during 2011, was high-lighted during talks and it is felt that this fig-ure can continue to grow. Putin added that he is willing to approve an 800 million USD loan to Serbia, which can be used for various in-frastructural projects across the country, so long as he is kept abreast of such projects.

Vowing to do their duty as a Member of Par-liament (in an honest and conscientious man-ner), and to serve the Serbian people in the best way they know, 250 men and wom-en were sworn in as MPs for the new Ser-bian Parliament. In the absence of a con-firmed Prime Minister or Government it falls to Zaharije Trnavčević, the Parliament's oldest member, to oversee proceedings. It is hoped that a new Government would be in place within the next week as political uncertain-ty is having an undue effect on the economy.

Nikola Gruevski, Prime Minister of Macedonia, has announced that his Government, as part of a 12 point economic and social plan, is to provide over 13 million Euros for job creation. The money will be spent in those areas most affected by unemployment, and it is expect-ed that it will take up to 4,000 names off the live register. Incentives will also be offered to small companies that are willing to employ ex-tra staff and to self-employed workers in the hope that it will generate some entrepreneur-ial activity. Other measures include helping vulnerable families, improving access to edu-cation for children, and removing some levels of bureaucracy in the agricultural sector. The opposition, however, viewed this announce-ment with some scepticism, noting that this was announces at a very ‘convenient’ mo-ment, with the local elections due early in 2013. The Social Democrats, who lead the opposi-tion, have held, and will be holding, a series of protests which will not end until September 2, 2012, when it is expected all protesters will de-scend on Skopje. Despite forecast figures in-dicating growth in the Macedonian economy (they vary from 1-2%), Nikola Popovski, the former Minister of Finance, is not confident that this Government programme will yield any significant results, as, in his view, it fails to address the core problems of the economy.

Former Prime Minister Jadranka Kosor has stepped down from her position as President of the HDZ Parliamentary Representatives Club, this in the wake of Tomislav Karamarko's elec-tion as HDZ Party President and her defeat in the primary. Karamarko's Vice Presidents will be Goran Jandroković, former Minister of For-eign Affairs, and Ivan Šuker, former Minister of Finance. Kosor's position as Vice President of Parliament remains as is, at least until such time as the HDZ leadership decide otherwise.

As of June 1st the toll rates on Croatian mo-torways will rise by 15% for cash or cred-it card payments. Users of the electronic toll system (ENC) will be able to avail of frozen rates for June, however, as the Government is attempting to encourage as many motor-ists as possible to switch to the remote sys-tem. The cost of an ENC unit will be lowered to a mere Kuna plus VAT, and so long as ENC us-ers have a balance of 500 Kuna or more they will be able to avail of discounted tolls. The aim of this stratagem which ostensibly bene-fits ‘prepaid motorists’ is, as always, to collect as much money for the State purse as pos-sible, in as short a period of time as possible.

In an effort to oversee a greater economic re-covery within Slovenia the Government has adopted a series of measures which are de-signed to stimulate growth. These measures are divided into four categories: improving the business environment; improving asset man-agement; changes to legislation regarding con-struction; and modifications to the payment and repayment scheme. The Government min-istries involved have been instructed to start enforcing these measures as of July 1st, 2012.

Croatian Deputy Prime Minister Neven Mim-ica recently visited Brussels to present the European Commission with the Neum Cor-ridor project, which, following Croatian Gov-ernment’s decision not to build the Pelješac bridge, should spare the passengers trav-elling in the South of Croatia the hassle of having to cross the border with B&H. Cecil-ia Malmstrom and Johannes Hahn, EU Com-missioners for Internal Affairs and Regional Policies, met with Mimica to discuss the best way in which to design the proposed corridor so that it complies with EU regulations. The questions which require addressing revolve around the implementation of the Schengen Agreement in a unique situation where a EU member state (or soon-to-be member state) is seeking free passage through the territory of a non-EU member. According to Mimica, the Commission will be working closely with the Croatian Government to find a pragmat-ic solution to all problems, as they view the proposed project in quite a favourable light.

putin pledges loan to serbia

serbian mps sworn in

macedonia commits to job programme

kosor takes a back seat following hdz primary

road tolls to rise 15%gloves are off for the slovenian government

european commission to look at neum

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Croatian Deputy Prime Minister Radimir Čačić is set to face trial in Hungary following a rul-ing made by the Hungarian Ministry of Jus-tice. Čačić had previously claimed diplomat-ic immunity after he had caused a fatal road accident on the Nagykanisza-Budapest mo-torway in 2010, when two people lost their lives. The Hungarian Ministry has ruled that Čačić was in the country as a private citizen, and that diplomatic immunity does not ap-ply in this instance. Čačić claims that he was not driving recklessly, but that it was an unex-pected cloud of fog which led to the fatal crash.

Milan Roćen, the Montenegrin Minister of For-eign Affairs, has announced that the country is to open an embassy in Priština, the capi-tal of Kosovo. Montenegro recognised the in-dependence of Kosovo back in October 2008, and diplomatic relations between the two were established in January 2010. Roćen went on to say that this move had been long overdue, but that it had been delayed un-til after the Serbian elections since there had been tension between Podgorica and Bel-grade over the issue: the Montenegrin Gov-ernment did not want to be accused of in-terfering in the Serbian election campaigns. No date for the opening has been decided upon, nor a name for the new ambassador: former Managing Director of the Montenegrin State Television, Radovan Miljanić, is ru-moured to be the man picked for the position.

Croatian President Ivo Josipović has just been on a two-day official visit to Brussels, where he met with President of the European Coun-cil Herman van Rompuy and President of the European Parliament Martin Schultz. The men discussed the various intricacies of the pending Croatian accession, focussing on the ratifica-tion process – something which is of concern given recent discourse between Slovenia and Croatia. Both the EU officials and the Croatian President stated that all was going according to schedule and that it was expected nothing would halt the eventual ratification procedure. Aside from these meetings, Ivo Josipović also spoke at the State of the European Union 2012. He also attended a conference, held by the IN-SEAD Business School, where he was joined by the Italian Prime Minister Mario Monti and a number of CEOs from European and Amer-ican companies. This gathering of luminar-ies discussed the role of the private sector in the future development of the European Union.

It was almost too good to be true: there had been no incidents of note for some time in Kosovo, but that couldn’t last. When KFOR learned that local Serbs had erected a road block near the town of Zvečani, blocking ac-cess to the Southern part of Kosovska Mitro-vica, they took measures to remove the barri-cade. As the forces went about their business they were reportedly attacked by a mob num-bering close to 1,000. KFOR retaliated with rubber bullets and teargas, but it has been said that live ammunition was used as well. Three Serbs were injured during the affray and one KFOR soldier. Serbian President Tomislav Nikolić called an urgent conference to deal with these events, but some of his statements will hardly do much to quell any fears. “We cannot sit still, nor can we be silent while witnessing what is taking place in Kosovo and Metohija,” he said. On the other hand, the relevant Kos-ovan authorities have been tasked by the Kos-ovo Government to impound all vehicles which are still displaying old Serbian licence plates.

Mayor of Ljubljana and former candidate for the position of Prime Minister Zoran Janković has come under investigation for an alleged corruption scandal regarding the acquisition of a plot of land in Niš, Serbia, where a Mer-cator supermarket had been built. The Slove-nian attorney's office is investigating the oc-currences of 2006, a period when Janković, then CEO of Mercator, supposedly received a kick-back of 100,000 Euros, which was in relation to a land deal that preceded the opening of the aforementioned supermarket. Janković's lawyer has confirmed that an in-vestigation has been launched but maintains that his client is innocent of any wrongdoing.

čačić to face trial

montenegrin embassy for priština

josipović visits brussels

protesters clash with kfor

janković under investigation

Boris Tadić, runner-up in the Serbian Presi-dential Election, has agreed to be put for-ward by his party, the Democrats, as a can-didate for Serbian Prime Minister. He made his decision late on June 3rd, just one week af-ter his defeat, claiming that any future Gov-ernment under his auspices would be "armed with aims and values, as well as with a plan which is both realistic and attainable". Tadić is expected to meet Serbia's new President, Tomislav Nikolić, and present him with a Par-liamentary majority, which, apart from the Democrats, will involve the coalition consist-ing of SPS (Socialist Party), PUPS (Pensioners’ Party) and JS (‘Unified Serbia’). There is also a chance that either LDP (the Liberals) or URS (‘United Regions of Serbia) will also be asked to join Tadić's broad parliamentary camp.

tadić seeks next best thing

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fortnightly feature

Put simply, the Government – or at least the men directly in charge of economic

and fiscal policy – mean well, but are still in the process of setting up the sort of

structure that could reap direct benefits.

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In 2011 Croatia experienced growth in Q2 and Q3 but saw a 0.4% decline in Q4. Following the 1.3% drop in Q1 of

2012, according to figures provided by the State Statistics Institute, Croatia has officially entered into recession again. There is some slight relief, true, in that the majority of analysts had predicted that the drop in gdp would be higher, between 1.5% and 3%, but what is tru-ly disconcerting is that spending is not down and tourist figures for 2012 are al-ready up 11.4% on last year’s numbers, but that the two most crucial things, in-dustrial output and investments, are hurting severely.

Finance Minister Slavko Linić has been trying to consolidate the State purse and the general fiscal area with some unpop-ular measures such as an increase in vat from 23% to 25%, announcing major cuts which are yet to be implemented; Deputy pm Čačić, for his part, has been courting foreign investors, but in the game he plays courtship only has value if it is crowned with a marriage of interest, and to achieve that he would need to have the benefit of a more functional system and less red tape.

It had been quite a turbulent week for the Croatian economy: industrial output, as reported, had dropped by 9% during Q1 of 2012, and Croatia fell back into recession. On June 1st, the Prime Minister announced that Croatia was “pretty

short of money.” It was looking very bleak indeed. At least it couldn’t get any worse, right? Well, there is light yet at the end of the tunnel, and the new

Governor of the Croatian National Bank, among others, will have to try his hardest to make sure that we see this light.

Croatia: New National Bank Governor and the

Eurozone Future

National Bank of 12 years, Željko Rohat-inski, has decided to step down. Or was put in a position in which he had to step down? It matters little.

Waiting on some statements whilst at the Croatian National Bank (hnb) just last week, we noticed that a television crew was setting up their gear outside the building: ominous indeed. It quick-ly emerged that there was something in the offing. Before long it was made pub-lic that Željko Rohatinski, Governor of the Croatian National Bank, was now going to be known as Željko Rohatinski, former Governor of the Croatian National Bank. It would seem that Prime Minister Zoran Milanović could no longer work with the man who had occupied the top bank-ing position for the past 12 years, and it soon became known that Milanović, with a long-term plan in mind for hnb, had asked Rohatinski if he would accept a shortened 3rd mandate (1-2 years), after which time he would be replaced by his then-deputy Boris Vujčić. Rohatinski re-fused, demanding instead the full 6-year mandate, giving the Prime Minister no choice but to withdraw all offers and

Put simply, the Government – or at least the men directly in charge of econom-ic and fiscal policy – mean well, but are still in the process of setting up the sort of structure that could reap direct benefits.

It is in this sort of climate, harsh but still somehow at least marginally prom-ising, that the Director of the Croatian

By Lee Murphy

Before long it was made public that

Rohatinski, Governor of HNB, was now

going to be known as Rohatinski,

former Governor of the HNB.

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14

give Vujčić the job instead. As Rohatinski brushed off most queries, (“You need to ask Milanović”, was his all but uniform answer), the Prime Minister took the time to explain his reasoning: “This is not a case of anybody ‘relieving’ Rohatinski, but rather of making a strategic decision on who will lead the Croatian National Bank for the next six years.” The now-ex Gov-ernor would speak to the press, clearly disappointed at the path events had tak-en: “I am leaving after two mandates as Governor of the Croatian National Bank: I was ready to remain in the position and the Government should have been able to see we could enjoy further – and success-ful – collaboration. Since I’m leaving, it’s obvious that they didn’t.”

the governor is dead – long live

the governor

Boris Vujčić could be called a pupil of Ro-hatinski, having served as Deputy Gov-ernor for the past 12 years; as might be expected, no great changes are likely to occur in hnb’s policy. This was certainly how Vladimir Ferdelji, the President of croma (Croatian Managers’ and Entre-preneurs Association), saw things as well.

“The change of Governors will not lead to a change in monetary policy as Rohatinski is succeeded by a man who learned only from him. If one were to see a change in

Željko Rohatinski

Željko Rohatinski, PhD, was born in Zagreb in

1951. He graduated in 1974, and then received his

doctorate in 1988, both from the Zagreb Facul-

ty of Economics. In the same year as his gradua-

tion he began working as a trainee in the Repub-

lic Bureau of Planning, and after 15 years there

he was elected to the position of General Man-

ager. Just one year later he was appointed Head

of the Macroeconomic Analysis and Policy Divi-

sion, Institute of Economics, Zagreb, which he

managed until 1998. Up until 2000 he was Chief

Economist at Privredna banka Zagreb, at which

time he joined Agrokor as Director for Macroeco-

nomic Analyses. He was on this last job for mere

3 months when he was appointed Governor of

the Croatian National Bank. In 2006 he was re-

appointed for a further 6 year term. In 2009 he

was awarded Governor of the Year by ‘The Banker’

magazine. He has been awarded several interna-

tional scholarships (including the Fulbright grant),

and he has written a number of scholarly papers

on economic issues, as well as two books, on

which was co-authored.

Željko Rohatinski was resented by the econom-

ic community for a number of policies, specifi-

cally his protection of the Croatian banking sec-

tor and his decision to peg the Kuna to the Euro,

something which affected the value of exports.

He also foresaw the economic crisis to some de-

gree and made sure that the banks under his care

could only have a limited amount of liability. It is

believed that this is the reason why the Croatian

banking sector was not as affected as those in

Ireland or Italy, or, for that matter, pretty much

all across Europe and the globe.

“Greece leaves the Eurozone and

brings back the Drachma; the Euro has to devalue, but

it can’t devalue as quickly...and

Croatia sees almost all of its shipping

business lost.”

june 14th

15

the current monetary policy, legislation would also need to be changed, so as to make the Croatian National Bank co-re-sponsible for the future creation not only of monetary policy, but of Croatia’s eco-nomic strategy as a whole.” This was ech-oed by Ljubo Jurčić, former Minister of the Economy and current President of the Croatian Association of Economists, who said that “the change of Governors will lead to no significant change, and that’s a good thing as any radical change would do more harm than good.” Ferdelji, ad-vocating the implementation of monetary scissors and an immediate production and export boom, and Jurčić, the tradi-tional Statist, may agree on the future of hnb as governed by Vujčić, but not neces-sarily on the degree – or rather the man-ner – of ‘responsibility’ the national bank should assume.

It has to be said, however, that the pu-pil becoming the master does not have to mean that the status quo will necessarily

remain. While it is accepted that certain policies will remain unchanged, it would be foolish to assume this will last indefi-nitely. As a well known pro-European, Vujčić might be expected to seek to get Croatia into the Eurozone at as early a date as possible. On May 29th, in a presen-tation given at the British Croatian Cham-ber of Commerce, he stated as much: “it makes sense to enter the Eurozone as soon as possible – the costs of entry may be in-creasing due to the crisis, but the bene-fits should still outweigh them.” We had hoped to interview Boris Vujčić following that presentation, but given the events that transpired it must be imagined that he was quite busy.

beware of greeks bearing drachmas

Accession to the European Union is but a year away, but the crisis which is sweep-ing across Europe (and not only within the Eurozone) is showing no signs of abat-ing: indeed, given recent events in Spain, it would appear that things are likely to get even worse. It’s not Europe, however, that Croatia needs to worry about, or at least not all of Europe: it’s Greece. That this is the case should be of no shock to anyone who has been aware of the head-ache that the Greek economy has been causing Brussels.

The Eurozone might still be some years away for Croatia, but that does not mean that a Greek withdrawal would not have an effect: Croatia already uses the Euro for 70% of all transactions. Should Greece leave the Eurozone, and presumably go back to the Drachma, it could spell dis-aster – palpable if not major – for the Croatian economy. The argument goes like this, as perhaps best summed up by Ante Babić, the independent macroecon-omist: “Greece leaves the Eurozone and brings back the Drachma; the Euro has to devalue, but it can’t devalue as quick-ly as the Drachma, which impacts heav-ily on the Croatian markets – specifically in the area of shipping where the Greeks are a rival to Croatian business. With the Drachma devalued, Croatia would see al-most all of its shipping business lost.” All the cheap holidays in Greece would do lit-tle for the Croatian economy. It feels crass to add that the Croatian tourism market would suffer to the benefit of the Greek is-lands and the Ouzo industry.

Boris Vujčić

Boris Vujčić, PhD, was born in Zagreb in 1964. He

graduated in 1988, and received his doctorate in

1996, both from the Zagreb Faculty of Econom-

ics. From 1989 until 1997 he worked as an Assist-

ant Lecturer at the Faculty, at which time he was

appointed Assistant Professor. A Fulbright Fel-

low, he also spent time at Michigan State Univer-

sity, USA, as part of his doctoral studies. From the

end of 1996 until July 2000 he was Director of the

Croatian National Bank’s Research Department.

Following this he was appointed Deputy Governor

of the Croatian National Bank, earning a second

term in 2006. As of June 6th, 2012, he has as-

sumed the post of Governor of the Croatian Na-

tional Bank, replacing Željko Rohatinski. An ar-

dent pro-EU economist, he was Deputy Chief

While it is accepted that certain

policies will remain unchanged, as a well known pro-European, Vujčić will to seek to get Croatia into the

Eurozone at as early a date as possible.

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If it comes to that...well...Croatia cannot control Greek behaviour and will have to bear its own portion of the burden. The more intelligent question is: could Croatia itself become the next Greece, especially in light of the fact that not a small number of Eurozone countries find themselves in very perilous regions indeed: Italy, Spain, Portugal, Ireland...?

kuna no more? eventually.

Željko Rohatinski, in his final speech to the World Bank, suggested that the fol-lowing cocktail might work: “a combi-nation of structural reforms, restrictive fiscal policy and reasonably expansion-ary monetary policy – so as to effect a dy-namic redistribution of limited funding from consumption to investment, and to use this investment to initiate sustain-able economic growth aided by low in-flation and exchange rate stability.” Very conservative, all this, as far as monetary policies go, but according to the former Governor this policy would “create a fa-vourable environment for foreign capital inflows in the form of direct investment and not loans.”

This is all well and good, and quite cor-rect should all the dominos fall as planned, but perhaps the investment climate is not quite so welcoming: in previous issues we have highlighted the general distrust for foreign capital, something which may change in time but, then again, it might not. It might be that Vujčić, with his Eu-ropean experience, will be able to alter certain mindsets amongst the business

community. Certainly Vesna Pusić, Min-ister of Foreign Affairs, speaks highly of the new appointee: “There had been talk, previously, whereby the Parliament might elect a new Governor, and Vujčić was men-tioned as a possible successor. My opinion of the man is excellent: he is a first class expert, as I have learned through his role in the European Union negotiation team.”

Croatia entered into those talks with the European Union back in October 2005, and the Kuna has been rigidly pegged to the Euro ever since.

In fact, were the European Union ame-nable, Croatia could join the Eurozone lit-erally tomorrow, as all the criteria have already been met, and are adhered to. Since the Kuna has been pegged against the Euro, the only remaining targets to at-tain were keeping inflation under 1.5% of

the average of the three Eurozone coun-tries with the lowest rates, for two years, and keeping the budget deficit under 3% of gdp; although the current Government estimates that this will be mere 2.8%, Rabobank feel that it will more likely be 4.5%. In any event, we shall see later on in the year. The final criteria relates to the amount of public debt a nation can carry

– under eu law this can be no more than 60% – and while Government estimates have Croatia meeting this target, it must be noted that Rabobank forecasts actually predict that the public debt will increase to 65%.

Whatever the case, the Croatian econ-omy needs to be, ultimately, part of the Eurozone; once Croatia is operating fully with the Euro as its currency – the opera-tional date of the switch is projected for sometime in 2017 – the country should be far more attractive to foreign investors. The Catch 22 is that the Eurozone criteria might yet be tightened, leading to further delays of Croatian entry. A delay, in and of itself, might not be such a problem, but for the growing crisis in Spain: the Euro-pean Union has €440 billion set aside, by way of member contributions, for the Eu-ropean Financial Stability Facility (efsf), but the risk now exists that this sum will not be enough to service such potential bailouts as might be needed. Prior to the announcement that the Spanish banking system was in dire of need of liquidity, it was felt that this fund should be able to service the needs of Greece and Ireland: the former almost definitely in need, the latter already on the way to recovery but in need of a safety net. When Spain and Italy are added to the mix, undue pres-sure is further placed on the finances of the European Union. Should the efsf (soon to be restructured and renamed the European Stability Mechanism – esm) be emptied, then it is unlikely that Brussels would allow any additional nations into the Eurozone.

Croatia’s banking sector is stable when compared to others around the continent, but is it stable enough? It is certainly liq-uid and, despite certain scenarios enter-tained above, Boris Vujčić, Europhile as he is, might just turn out to be success-ful in keeping Croatia to its current Euro-zone schedule. Who knows, he may even manage to negotiate an early entry. Now, wouldn’t that be something, even in the eyes of his detractors...

Vujčić may even manage to negotiate

an early entry into the Eurozone. Now,

wouldn’t that be something, even in the eyes of his

detractors.

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The Serbo-Greek Umbilical CordWhen it comes to the Eurozone, Serbia is much closer to the eu than

it seems - and particularly sensitive to the stability of its weakest member: Greece. And, with Greek banks accounting for as much as

16% of the Serbian banking sector, yet another doomsday question cannot help but be asked.

By Miša Milošević

Greece is one of the largest investors in Serbia: over 200 companies and businesses from this traditionally

friendly country have made more than 2 billion Euros of direct investments and employ more than 20,000 people.

Let us take a look at the banks. There are currently four Greek banks operat-ing in Serbia: Alpha Bank, efg Eurobank, Piraeus Bank and Vojvođanska (National Bank of Greece), which together hold a considerable market share of 16.3%. In spite of certain problems in banks’ abid-ing to Government's recent regulation of the banking market, previously unregu-lated particularly in client relations and conditions, they seem to be pretty stable: Eurobank efg recorded a positive balance in q1 2012 and the remaining three only moderate losses. Veroljub Dugalić, Sec-retary General of the Association of Ser-bian Banks, is very much confident in the Greek banks: “They are established in ac-cordance with our laws, entirely autono-mous, safe and solvent, and our citizens’ deposits are entirely safe”. Similar anti-panic messages are coming from the Na-tional Bank of Serbia, which claims there are no reasons to withdraw deposits from Greek banks in Serbia, stating that their capital cannot be withdrawn or taken out

diligent the Serbian Government will be in enforcing their monetary policy and keeping the mandatory reserves where they should be.

Should the Greek general elections on June 17th fail to bring a reform-oriented Government, it is very likely that Greece will step out from the Eurozone and that the Greek banks will be cut off from most international sources of funding. This could cause one of two consequences: a short term shock to the money market, due to the fact that banks are the primary channel of Greek investments in Serbia. It would soon become obvious which Greek banks are directly involved in the crisis back in their homeland, which would like-ly result in their withdrawal from Serbia or, adversely but less probably, see them attempt to restructure their market posi-tions through mergers and acquisitions. As a long-term consequence, the Greek public debt crisis would cause the cost of capital in the Eurozone to jump, reducing the overall amount of direct eu investments in under-developed countries, including Serbia.

Other industries in which Greek capi-tal is invested include food and beverage, oil, tourism, construction and trade: all of these would also be affected either by withdrawal of investors or slowdowns in investment cycles and reduced export volumes. The remaining part of a 100 mil-lion Euros Greek donation, for Serbian Corridor 10 highway, would also have a question mark over it.

The conclusion seems to be clear enough: Serbian people would prefer see-ing a stable Greece which invests in Serbia, rather than enjoying cheaper holidays in Drachmas yonder in the (now very trou-bled) land of the Olympian gods.

of Serbia, except in case a bank in Serbia has to repay a debt to the mother bank in Greece. And this is exactly what hap-pened in April: when the Serbian Nation-al Bank reduced the mandatory hard cur-rency reserve for banks, more than half a billion Euros were withdrawn by banks and most of it was sent ‘back home’ - not only to Greece, of course. This is a clear indicator that the mother entities in the Eurozone need money. Should Greece decide, or be forced, to step out of the Eurozone, it is impossible to foresee how

in the margin

Should Greece decide to step out of the Eurozone, it is impossible to foresee how diligent the Serbian Government will be

in enforcing their monetary policy.

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Slovenia: From Austerity to Affluence?

Not Quite Yet.Having just enacted a series of austerity measures, and having convinced the

public sector to forfeit a part of their earnings, the Slovenian Government could be forgiven if they sought to indulge in some self-congratulation.

There doesn’t seem to be much back-patting going on, however, perhaps because they don’t want to antagonise the already irritated trade unions.

It may also be because the Government knows that tougher times still lie ahead.

By Sebastijan Maček

Austerity budget? Check. Public sec-tor pay cuts? Check. Glimmers of economic recovery? Check. Well,

sort of. Things seem to be going rea-sonably well for Slovenia at the mo-ment, even against the backdrop of the continuing conundrum of the Eurozone and the increasingly likely prospect of Greece abandoning the Euro, presum-ably plumping for some kind of ‘Geuro’ or a ‘new Drachma’. In keeping with its

‘teacher’s pet’ image, Slovenia is taking its eu prescription of austerity and re-form very seriously indeed. If we look closer, however, the picture is far more nuanced than immediately obvious, and far more troubling.

not as austere as expected

The austerity package, a voluminous om-nibus law that amends dozens of pieces of legislation, was originally expected to cut Government expenditure by approxi-mately 820 million Euros during 2012. The end-result was somewhat stark in differ-ence: after weeks of tense negotiations

domestic product (gdp), down from last year’s 6.4%.

Just how it plans to do that, given the disparity in estimates, is anybody’s guess. There is talk of the Government find-ing extra savings in investment spend-ing but that carries its own risk: that of losing the support of the corporate sec-tor. The corporate sector had been all too happy to embrace spending cuts so long as they had been coupled with an increased expenditure on things that businesses benefit from, such as invest-ments and subsidies. Fresh incentives in the form of grants, loan subsidies and guarantees have been announced, but they are not nearly big enough to offset investment cuts and may yet be deferred to late in q4 2012. In other words, they are not likely to have any tangible impact this year.

reform or go bust

With austerity out of the way, the focus has now shifted to structural reforms. Slovenia has often been berated for its complacency and lack of zeal when it

with trade unions and an unprecedented public sector strike that figure was re-estimated, downwards, to around 220 million Euros in savings. This has not de-terred the Finance Ministry from assert-ing that it still plans to meet its target of reducing the budget deficit to 3% of gross

the economy

There is talk of the Government

finding extra savings in investment

spending, but that carries its

own risk...

june 14th

21

comes to the reform process. Pundits have eagerly pointed to Greece as an ex-ample of the failure to reform, and the

‘Greek scenario’ has become a scare-word liberally tossed around whenever any reform naysayer needs to be brought into line.

A recent report by the European Com-mission says that “no major structur-al reforms were taken in 2011”. In the short-term it doesn’t seem that Slovenia is ready to get out of this mess: the Eu-rocrats say that the degree of ambition

“seems modest, given the scale of the challenge”. The Government, however, seems confident that reforms, although delayed, will be put in place. The reform drive will be two-pronged, focusing on pensions and the labour market. Both have been attempted before, and both are riddled with risk.

When we consider labour market re-form, the Holy Grail is flexicurity, a sys-tem that allows employers to hire and fire workers without excessive restrictions while also giving employees a soft enough cushion to fall back upon should they lose their job. Corporate bosses are salivating at the prospect of ‘adjusting’ the head-count depending on the economic situa-tion, but the trade unionists are under-standably hung up on the ‘–curity’ part of the equation, demanding a strong social safety net. Talks have not yet even started in earnest, but both sides are already en-trenched, having made it clear that they will not settle for minor adjustments (the corporate lobby) or accept a fully-fledged labour market liberalisation (the union bosses).

Pension reform is easier in princi-ple: the country simply does not have enough workers to support a growing population of pensioners. Since import-ing huge numbers of immigrants to bal-ance the ratio is unthinkable, and po-litically unpalatable, the only apparent solution is to change the retirement age (and not in a good way), and reduce pen-sion payments.

The problem is that both labour mar-ket and pension reforms have been tried before, by the centre-left Government, which was voted out of office before the expiry of their mandate, at the end of 2011. At the time they were shot down by the unions, which mobilised their rank-and-file and initiated referenda at which vot-ers decisively rejected the reform laws.

The union movement had had very gener-ous help from the parties that now make up the ruling centre-right coalition, an irony not lost on the leftist parties which have since been relegated to the opposi-tion precisely because they supported the reforms.

the golden rule of politics

For a while it seemed as if the ability of unions to shoot down legislation with referenda would be curbed. Slovenia has made the commitment, within the eu, to amend its Constitution with a Golden Rule determining that except in times of severe economic crisis, the budget must be balanced or in surplus. This, the Euro-pean Fiscal Compact, also means, conven-iently, that any referendum which could have ran afoul of this rule would have to be declared unconstitutional by the Con-stitutional Court. But, after Francois Hol-lande was elected President of France, the tide of austerity in the eu has started to turn in favour of the proponents of stimu-lus, which the main opposition party, the Positive Slovenia, quickly seized upon to withhold support. The Golden Rule has now been shelved, a price the ruling par-ties are paying for having pragmatically objected to reforms that are now more urgent than ever.

The Golden Rule has now been

shelved, a price that must be

paid for having pragmatically

objected to reforms that

are now more urgent than ever.

The Socratic Janša

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There is broad agreement that it is far too easy to call a referendum in Slov-enia. Some have even suggested that the threat of referendum hanging over every key piece of legislation makes the country ungovernable and want to clip the wings of the unions. A deal of sorts, to amend the Constitution, may still be hashed out, as all parties have reached an agreement (in principle) to make it more difficult to call referenda while explicitly prohibiting voting on issues such as human rights and public financ-es. But the leftist parties may still back-track, for they are in hock to the trade unions, which may see the new rules as a somewhat excessive curb on their power, and may force their political al-lies to change tack.

it gets worse before it gets better

All this makes the politics of dealing with the crisis devilishly difficult. What is required is a broad political consen-sus on ways which will aid Slovenia

in emerging from the quagmire. The country has a poor track record when it comes to bipartisanship; the con-stant bickering, and the preoccupation of the new Government with the taking control of the levers of power, is dan-gerously deferring much needed ac-tion. As some level-headed commenta-tors have suggested, it will have to get much worse before everyone realises that things need to change.

Ironically, the latest gdp figures show that Slovenia’s economy contracted by 0.2% in q1 2012, which was less than ex-pected. This will make it easier to bring the budget deficit to 3% (or below) of gdp, but it will also make it difficult for the Government to convince the people of the need for more austerity and reform. There have been only a handful of occasions in the past twenty years when everyone came on board for what was perceived as a common goal. The ditching of the Tolar in favour of the Euro, in 2007, was one such project. Hopefully, taking action to prevent economic calamity, tough as it may be, will be another.

A ‘GREXIT’? THAT WILL BE 1.7 BILLION, PLEASE.

The fallout from a Greek Eurozone-exit is

difficult to gauge. Some estimates suggest

that the combined Eurozone GDP would fall by

about one fifth in the short term and Greece’s

by as much as half. The direct impact, however,

can be measured. The Government says

Slovenia’s exposure to Greece is tantamount to

about 2% of GDP, the majority of that in loans

and guarantees that Slovenia extended to the

troubled country as part of the EU bailout. The

Finance Ministry optimistically claims a Greek

exit would, therefore, be manageable. But

that is only the direct exposure of the State.

The exposure of the State plus the Central

Bank is estimated at about 1.5 billion Euros,

according to a recent study by the Centre for

European Policy Studies (CEPS), a Brussels

think-tank. Add to that an estimated 200

million Euros on bank balance sheets and the

total ends up being an eye watering 5% of GDP.

This approach, we 're afraid, won't do any more.

june 14th

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m & a

M&a activity in 2012 will likely undergo a slow-down in the region, as it begins to

match Global and European trends...

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25

The world of Mergers & Acquisi-tions was so much simpler when I first joined Ernst & Young in 1999.

My first job was on a merger of sever-al banks, as an assistant: even after that, in the years to follow, there were still plenty of banks which were available for purchase within Croatia and the re-gion. The first due diligences I took part in were uniform, thorough, and lengthy, and almost always resulted in reports, hundreds of pages long, that often de-tailed more than could be read on the subject in several sittings. When a mar-ket emerges, even as small as the Croatian market was then, acquisitions seem the easiest way to grow into it. As a conse-quence, we advisors were very busy and highly valued, which means that it made perfect sense to build whole departments around m&a.

Ten years of simplicity later, at the on-set of the crisis, advisors were engaged in formulating smarter and less threaten-ing expressions of a term “all-out-crisis”, and assessing (not to be confused with guessing) whether the recession will last a year or maybe two. Neither activity paid much. Since then there has been much discourse, debate, discussion, even dis-cord, about the recession. What I’d like to focus on, however, is an upside to a cri-sis, be it this one or another. For, you see, each crisis induces, or at the very least creates, potential for progress. In other words, although much of Europe is still in the restructuring process (or should be), there are some indicators of better times ahead, for both Croatia and the region.

Enough talk about rising debts, recessions, crises and the like. Things are as they are, and companies quite simply have to go on. And, as always, some will be bought, others will be buyers. Enter Ivan Bilić of Ernst and Young to help us

navigate through the always captivating field of M &A.

Mergers & Acquisitions In Pre-EU Croatia

see countries saw an increase in both the number of transactions and the volume. In Croatia more than 70% of all transac-tions during 2011 were made by strategic investors rather than the financial sector, something which is mirrored through-out the region. If we break it down by industry, most transactions took place in Manufacturing (163 deals), Services (130), and Energy & Mining (110). The sectors with the most valuable transac-tions were Telecommunications & Me-dia, Chemicals, and Banking & Financial Services.

M&a activity in 2012, however, will likely undergo a slow-down in the region, as it begins to match Global and Europe-an trends: this should continue into H1 of 2013. Ernst & Young recently published a Global Capital Confidence Barometer, which compiled data based on the an-swer provided by as many as 1,500 cor-porate executives from 57 countries and 40 sectors, as well as 150 Private Equity investors. The results are quite interest-ing: although the executive body view the global economy more positively than they did six months ago, they, for the most part, nevertheless see their companies focussing on organic growth – only 31% of those queried expect to pursue acqui-sitions over the coming twelve months. This last figure is in stark contrast to 57% polled in April 2010 and 41% in October 2011. Unfortunately, even those with an appetite for investment are likely to be lured away by more attractive markets such as those in China, India, the us, Bra-zil, and Indonesia.

These indicators, buried as they are be-neath a myriad of questions, make for some interesting analyses.

m&a trends

Central and South Eastern Europe, in terms of m&a, saw growth during 2010, and this continued into 2011. Although this was mostly driven by large indi-vidual transactions in Poland (Polkom-tel sold for 6.6 billion usd and Bank Za-chodni sold for 3.8 billion usd) most cee/

By Ivan Bilić

Ivan Bilić is a Senior Manager in Transaction

Advisory Services with Ernst & Young Croatia.

He has been with Ernst & Young for over 12

years, working on audit and transaction sup-

port engagements from the offices in Zagreb

and Ljubljana. He has extensive experience in

cross border transactions, advising investors

across the region. He has a Degree in Business

Administration, with a major in Internation-

al Finance, from Georgia State University, USA,

and is a member of the Association of Char-

tered Certified Accountants (ACCA).

www.see-magazine.eu

26

On a positive note, however, it must be said that m&a fundamentals are becom-ing much more favourable: many believe that the number of opportunities is in-creasing and that the quality of poten-tial targets is also improving. When we compare the current environment to six months ago there is now a greater likeli-hood of any given deal being concluded satisfactorily. In addition to this market upswing, it is likely that the divesting of assets will in the future be less of a contin-gency and more of a core strategy: com-panies will be making difficult decisions on which direction their business will take, and where they should seek to com-pete. This new focus on the core business will not only enhance shareholder value, but can also provide a way to raise capital in order to compensate for the underper-formance of the aggregate business. Fur-thermore, many companies have taken advantage of the globally improved lend-ing climate – and hence more favourable interest rates – to gain access to additional leverage and reduce their cost of capital. It will be interesting to see if such trends will stretch further a-field to some of the countries with the highest debt-to-cap-ital ratios, such as Italy, the Netherlands, Russia, and Spain.

Unlike strategic investors, Private Eq-uities will increase the rate and volume of investment, benefiting precisely from divestment trends of strategic investors, which will make available a large number of interesting targets. Private Equities will also look less in the direction of Europe and more towards emerging and even developed markets elsewhere. This may well become the general trend as compa-nies based in the Eurozone tend to display a more negative sentiment towards their local economies than their counterparts elsewhere. Sovereign austerity, com-bined with a heavy emphasis on corporate cost-cutting, will make economic growth even more difficult in the future.

croatian outlook

Back to the Ernst & Young survey, many of the respondents will continue to focus on cost cutting, supply chain rationalisation, and the divestment of non-core assets to achieve operational fitness. When asked how they are managing through the Eu-rozone crisis, 55% of European respond-ents cited cost reduction as their primary

focus, which is a significantly higher rate than is the case with the rest of the globe.

Fortunately for Croatia, the nearing of Accession to the European Union (Ju-ly 2013) will likely nullify this negative trend. Prior to Croatia joining the eu it is expected that foreign investors will seek to acquire domestic companies across a wide range of industries, while some of the larger domestic companies will con-tinue the trend of acquiring subsidiar-ies in their non-eu neighbouring coun-tries. Furthermore, the new Government seems pretty busy trying to attract buyers for some of the larger State-owned com-panies that had been left out of previous privatisation rounds, but also for larger manufacturing companies in which the Government has interests other than ownership (e.g., former cmc Sisak).

As for us at Ernst & Young, we keep looking on with anticipation to see how much serious interest there will be for Croatia osiguranje (Croatia Insurance) and hpb (Croatian Postal Bank). It is unclear at this stage whether the two companies in question, or the Government, have had, or will have, a sufficient amount of time to prepare for any transaction whereby they might extract the most value out of any future sale: indications suggest that any transactions relating to these two will be sooner rather than later.

In contrast to these new opportuni-ties, the shipyards have been on the menu for quite some time now. The Govern-ment will likely have to amend its current approach – that of seeking a sale – with

regard to some, if not all, of its assets in this department. The difficulty here does not lie with the Government, nor the labour movement, but rather with the market itself: following a slight recovery in 2010, shipbuilding looks like it might be re-entering a global crisis. Shipbuild-ing, by its very nature, is slow to react, and any knee-jerk reactions to market shifts can be catastrophic. The industry is driven by freight rates that are realised by operators in the spot market, but the main challenge is that the construction of a ship takes several years. It is obvi-ous to many that this reality forces ship-owners, worldwide, to anticipate future economic developments, just as it forces shipyards to plan and build production facilities for projected demand.

Let us illustrate this in a more rec-ognisable language: in June 2008, just months prior to the Lehman Brothers collapse, spot rates for capsize bulk-ers (the largest bulk carriers) reached 219,000 usd per day. The rates for sec-ond hand ships, however, exceeded that of new ships, simply because they were available within a relatively short period of time. After a period of double-digit increases in freight rates, the size of the worldwide order book peaked in 2008. However, the impact of the global down-turn, once things started going downhill, was devastating: the spot rate for the same capsize bulkers reached the low of 3,000 usd per day, a drop of almost 99%, by November 2008. Although, as these figures hint, orders for new ships

In contrast to a number of these new opportunities, the shipyards

have been on the menu for quite some time now.

3. Maj Shipyard

june 14th

27

decreased significantly, an overcapacity of tonnage will persist until all ships, al-ready ordered prior to the downturn, are finally delivered.

In this environment only the Chinese and Korean shipyards can compete: this is due to lower labour costs, but also due to a lack of standardisation when it comes to building highly customised ships. Even the efficient Japanese shipyards are los-ing ground, and the European shipyards seem unable to compete in the face of the Asian economy.

So, is there a solution? Bernd Rich-ter, Ernst & Young’s emeia Restructuring Shipping Leader, recently states: “The dis-parity between capacity of shipyards and demand for new ships spurred negative price effects and the risk of being driven out of the market. In these surroundings, Western shipyards can only survive by of-fering high-quality niche products.”

That said, another Government direc-tive, which will see the sale process for all State-owned hotels begin by Q4 2012, may well yet play a significant role in the

increase of m&a transactions in Croatia. While the hotel industry only amounted to 1% of all transactions during h1 2012, and though the market is not particularly wel-coming of such transactions, the Govern-ment’s decision might yet prove a catalyst for change. Many potential investors view Croatia as perfect for the tourism industry, specifically health-tourism: facilities can remain open all year round as the climate is attractive. This positive tone, as set by the Government, is further emphasised by the very active fgs funds which have already completed several investments.

exit-readiness

Below are just a few of the large number of variables that may affect the volume and number of transactions in Croatia – and the region – in the coming months. One factor not mentioned, but nevertheless important for the value of transactions in Croatia and immediate region, is the abil-ity of a Seller and a Target to a) Prepare for a successful transaction and b) Extract the optimal value from a sale.

While all large transactions require a thorough and timely preparation (and a thought-out process), many small- to medium-sized transactions are motivat-ed by the need to sell only, and are often not well prepared. This may lead to a de-terioration of value and/or disruption to operations as a consequence of significant level of strain upon management and key personnel of the Target. For several years Ernst & Young has been offering an Exit Readiness service to its clients and has performed a survey, with Private Equity professionals, on the subject of value en-hancers and eroders: the Exit.

Value enhancers identified during Exit most commonly included the following:1) Early preparation helps identify key risk areas (i.e., many easy wins can be captures with mid-term working capital

management projects).2) Alternative exit strategies planned and communicated from the outset (i.e., al-ternative exits both enhance the capture of optimal value, but also help sellers un-derstand the buyer’s perspective).3) Strong leadership and ownership of the process (i.e., these often provide clar-ity and comparability around the bidding process).4) Well supported forecasts and a robust model (i.e., management rarely under-stand the level of detail and support re-quired by the buyers).5) Cost reduction plans supported by op-erational due diligence (i.e., performing operational due diligence focused on spe-cific cost reduction initiatives provides comfort around the management process and capabilities).

Most commonly mentioned value eroders include:1) Little support for the upside (i.e., value enhancing opportunities were not well thought out or articulated).2) Poorly addressed key business is-sues (i.e., management rarely have well thought out and detailed capex plans).3) Drawn out process (i.e., partly thought out plans to address key risks can result in caveats and draw out the process).4) Little or no access to management (i.e., reduced access to management results and poor understanding of the business and equity).5) Poor records/kpis (i.e., the business needs to be packaged in the way in which it is managed).

Exit Readiness is just one of the servic-es provided here: Ernst & Young also have new, and more complex, restructuring and working capital management services on offer. The recession has had a signifi-cant effect on our standard services, such as due diligence. When compared to what was the case before the crisis, our reports are now much more focussed as the cli-ents are now more demanding and require a more tailored approach. The client is also more involved in the process than before, and as a consequence the client is also far more informed than previously and hence able to make better decisions. Given that the environment is much more sceptical and complex, this is much needed.

Thor Heyerdahl once wrote: “Progress is man’s ability to complicate simplic-ity.” If that holds any truth, we are surely making progress.

While all large transactions require a thorough and timely preparation, many small- to medium-sized transactions

are motivated by the need to sell only...

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editorial

The old model is believed broken: it is four years since the 2008 collapse of credit markets and

no real reforms have been put in place.

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29

On May 17th and 18th, 2012, the Pres-ident of the United Nation’s (un) General Assembly and Secretary

General jointly convened a High Lev-el Thematic Dialogue on the State of the World Economy. High level thematic di-alogues are used by the un to address important challenges that are not being thoroughly addressed conceptually by standing departments and committees of the un.

In his remarks, Secretary General Ban Ki-moon called for a “conceptual revo-lution” in addressing what was wrong with the world economy. Other speakers insisted it was time to “think outside the box” or that “business as usual” will not trigger enhanced economic growth. The old model is believed broken: it is four years since the 2008 collapse of credit markets and no real reforms have been put in place.

I believe it was a moment for innova-tion – a perfect environment in which the Caux Round Table (crt) and our partner, the Convention of Independent Financial Advisors (cifa) – should step forward and lead.

The dialogue was called by the major-ity of member states who are left out of g8 and g20 discussions on global financial architecture. Their perceptions were that the strong economies failed in the 2008 collapse, the ongoing crisis of Eurozone finances and in tolerating systemic im-balances in current accounts and finan-cial reserves, which led to unsustainable swings in global finance. The majority of

Too often do we tend, especially in this region, to embroil ourselves in the (often almost insignificant) ins and outs of national agendas and peculiarities

that just as often tend to ignore the bigger picture. Steve Young of Caux Round Table, commenting on the high level thematic debate at the un on the state of

the world economy, is here to remind us what is truly at stake.

The State of the World Economy

These countries voiced three main con-cerns: 1) growth to create jobs; 2) mod-eration in the prices of energy and food; and 3) investment in their economies.

The perception was that the world economy has not delivered on these es-sential outputs. Growth has not resumed sufficiently so as to make up for the loss-es in employment, income and produc-tion caused by the 2008 collapse. Qatari Ambassador, Nassir Abdulaziz Al-Nasser, President of the General Assembly, stated that the pressing issue was global recov-ery – escalating inclusive development to reduce poverty, while sustaining the en-vironment and its future fecundity. The role of the un, as compared to the g8 and g20, was to be the only inclusive, multi-lateral forum, where a common vocab-ulary and agenda for real action could emerge. A system is needed which can provide sufficient jobs under conditions of climate change and growing resource scarcity.

On May 19th, g8 leaders met at Camp David with President Barack Obama and declared that “Our imperative is to pro-mote growth and jobs.” But, how is this going to be accomplished? Therein lies the rub. Paul Volcker, former Chairman of the Federal Reserve, reminded participants that only private sector trade and finance lead to growth. Imbalances and specula-tion lead to financial strains. He said we are faced with no intellectual or political consensus on what is to be done, which has produced a paralysis of will and con-tributed to policy stagnation.

these countries view themselves as de-pendent on the wealthy ones for invest-ment, absorption of exports, steady cur-rency values and reasonable prices for energy and food. They believe they suf-fer most when the global financial system performs poorly.

By Stephen B. Young

Stephen B. Young received his ab degree from

Harvard College in 1967 and his jd degree from

the Harvard Law School in 1974. While in the

Harvard Law School, he was made a term

member and then a member of the Council on

Foreign Relations, and the served, among oth-

er things, as a university professor, consult-

ant for a number of governments, Dean of the

Hamline University School of Law and, from

1990 until 1996, as the Honorary Consul of

Singapore in Minnesota. Stephen B. Young be-

came the Global Executive Director of the Caux

Round Table in 2000. He wrote the book Mor-

al Capitalism to explicate the economic and

moral approach of the Caux Round Table

to free market capitalism.

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The need, therefore, is to think well be-fore acting – to arrive at a consistent set of rules for bank capital requirements and accounting conventions and a commit-ment to open markets. He called for a part-nership between private capital, business and national public responsibility.

José Manuel Barroso, President of the European Commission, said that irre-sponsible, private behaviour, coupled with lax regulation, led to the misallo-cation of capital, which added to public expenditures, which in turn increased public debt levels, producing the current crisis in the European Union. The eu gov-ernments, he affirmed, have delivered a robust response of creating firewalls be-tween unsustainable financial practices, reforms of government programs and help to vulnerable member states. The eu now recognises that debt-fuelled demand to stimulate growth is unsustainable. Fiscal consolidation is needed to cut borrowing costs and provide confidence for financial markets. New infrastructure projects will be financed with bonds secured by such projects. More capital has been contrib-uted to the European Development Bank to finance new loans. The eu is a politi-cal process, not just a source of monetary advantage. It is facing up to its internal needs and international obligations.

Leaders and ambassadors, from a va-riety of countries, spoke to the com-mon theme: the financial system must be placed in service of the real global econo-my. This high level dialogue was far better at defining the problem than in providing specific guidelines for actions that would accomplish that objective.

In the subsequent dialogue sessions, I was made aware of how, ahead of the curve, the 2008 recommendations of the crt’s Global Governing Board had been put forth. Crt’s understanding of the ethical responsibilities on the respective parts of business and government is still cutting edge, with four years of hindsight now available – a most credible record of intellectual leadership, but a poor reflec-tion on the actual leadership which has been confronting our global economic shortfalls.

The crt’s ideas, along with the insights provided by our colleagues from cifa, were very welcome.

Jean-Pierre Diserens, Secretary Gen-eral of cifa, expressed his belief that private investors now have little to no

trust in great financial houses, regu-lators or in sovereign responsibility. Without trust, markets stagnate and in-vestment-driven growth is fitful. Pro-fessor William Black of the University of Missouri-Kansas City reminded par-ticipants that criminality is a constant in private affairs; no system of private ordering is entirely free from predators.

In financial intermediation and corpo-rate profit-seeking, it is often “control fraud” – providing misleading informa-tion – that permits executives to “loot” companies of current income, as was the case with Enron. Under these proce-dures, current income is privatised and long-term losses are socialised to own-ers or the public.

PERCENTAGE OF RESPONSES SELECTED AS HIGH PRIORITY

PERCENTAGE OF RESPONSES SELECTED AS MEDIUM PRIORITY

PERCENTAGE OF RESPONSES SELECTED AS LOW PRIORITY

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CRT NETWORK RECOMMENDATIONS

Integrity in governance was advised by members

of the Caux Round Table network as having highest

priority in the effort to rejuvenate global capitalism.

One hundred and forty-two members of the CRT

network responded to a recent questionnaire

asking for their considered opinion as to what steps

should be taken to improve the world economy.

The four priorities most advised for immediate

attention were: (1) Addressing inequality; (2) more

discipline in public finances; (3) separating banking

from proprietary firm trading; and (4) improvement

in corporate governance.

In short, the considered judgment of these

professionals in business and corporate social

responsibility looked to the fundamental quality of

stewardship responsibility for the common good as the

foundation for enhanced world economic outcomes.

They placed that responsibility primarily with

public officials to provide for responsibility in public

spending, in management of credit markets, in

redressing unbalanced wealth accumulation in the

hands of the few, and in private sector leadership

of wealth-creating institutions.

It is a powerful insight to acknowledge that strategic

values matter in the long run, as well as a telling

reminder that unrelenting and unconstrained self-

interest is not seen as being in the best interests of

the community at large.

It is therefore not an argument between austerity

and deficit spending on entitlements that should be

paramount, but rather on the selection of leaders –

both public and private – committed to a stewardship

ethic that promotes change in current policies.

It is a time for leadership, for the elevation

of human capital over financial market plays.

Additional steps recommended by survey

respondents for high priority attention focused on

incentives in the private sector that can be skewed

towards mismanagement of wealth creation.

There are needs to predict systemic risk in financial

intermediation, set compensation incentives to

favour long-term growth, and reduce outflows of

illicit capital from poor and developing countries.

It is the private sector that creates systemic risk

in financial markets; it is the private sector that

puts a bias for short-term results in compensation

packages; and it is private individuals in poor and

developing countries who abuse their status

and illicitly divert financial resources out of their

country, denying it capital for investment.

In the second rank of recommendations came

more technical concerns: liquidity provision by

central banks; predicting systemic risks in financial

intermediation; improving valuation formulas and

more reliable pricing by markets; and the adoption

of CSR standards by firms. Also in the second rank

were endorsements of the recommendations made

for higher priority initiatives, which add credibility

to the soundness of taking these steps: Addressing

inequality, separating banking from proprietary

trading, more discipline in public finance, and

improvement in corporate governance.

On the third level of recommended action

items was a hefty preference for increasing

competition among rating agencies, again

an echoing theme of responsibility to serve a

common good by providing information that

influences investment decisions.

Efficient financial markets require quality information

as a public good to reduce the impact of “fat tail”

or Black Swan unforeseen occurrences. Good

information should help distinguish what is within a

range of predictability from considerations that go far

beyond the range but should not, for that reason, be

completely divorced from consciousness. The quality

of market information confers reliability on prices set by

free competition. On the third tier of priorities, survey

respondents further focused on decision making

conditions within private firms: Increasing capital

requirements for all financial institutions; adoption of

CSR standards by firms; compensation incentives for

long term growth; and improved valuation formulas

and more reliable pricing by markets.

Among the numerous written comments sent in,

a theme of addressing the mechanics involved

was evident. Comments noted that the root

cause of banking and other corporate failures was

often cultural; another expressed cynicism that

many discussions of what to do to enhance the

global economy go no deeper than stigmatising

symptoms of poor performance.

On the substantive side, comments pressed towards

diffusion of economic power so that markets would

have more players and more opportunities to get it

right. These comments also referenced corruption

and cronyism where concentrations of authoritarian

power lead to misallocation of national income and

wealth in favour of a few.

Lastly, comments exposed the tension between

aggressive acquisitiveness and sustaining the

ecosphere that ultimately supports economic

production and consumer consumption.

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32

technology

If we were to tell you that there were over 1 billion users of Cloud technol-ogy, would you believe us? The truth is

that that figure is for social media alone: Twitter, Facebook, Skype, Google+, etc. Also, services such as Youtube, Hotmail, Gmail, Dropbox, as ubiquitous amongst the technologically savvy consumer to-day, all utilise what is now common-ly referred to as the ‘Cloud’, or ‘Cloud Computing’, a notion far older than one might immediately suspect: the concept dates as far back as the 1960s (some say even the fifties), and was the subject of much (science) fiction of that era. The idea of all computers being inter-con-nected and all-powerful has provided the world with innumerable novellas and films over the decades. It wouldn’t be until 2006, however, that 'Cloud' be-came what we’re familiar with today.

Amazon.com, who started life as an online bookstore, realised that their

What do early science fiction flicks, Amazon, Apple, Croatian Telecom (t-ht) and Luxor Group, a company specialising in

cleaning, catering and facility management, all have in common? Well, ‘Cloud’ computing, to begin with…

A Brief Walk through…‘Cloud’

know today. The company O’Sullivan was involved with at the time was NetCentric, who were then negotiating with the larger American firm. This was in 1996. Accord-ing to the Irishman, “NetCentric correct-ly predicted the evolution of lan services and in-computer services to the Cloud, and although we didn't manage to cap-ture much of the business for ourselves, Cloud Computing has had an impact on close to half the people on the planet.” Given that Cloud Computing will soon be the default business model for practically all companies in the business, O’Sullivan may well regret allowing his 1997 trade-mark on the term to lapse.

Naturally, it just wouldn’t be the same unless Apple too got involved, and in-volved they are, proving, in a most direct way, the immediate practical bankabil-ity of the technology in question. iCloud is celebrating its first anniversary this week (or at least the first anniversary of its beta release) and has been available as a stable platform since March of this year; whether one is a fan of Apple gadgetry (and software) or not, there is no denying the sheer ingeniousness of it all. Of course it’s possible to sync non-Apple devices with your main pc or laptop, or to upload your photographs, taken by your iPhone, to whatever social media stream you so desire. Now, it’s not that this isn’t pos-sible, as such, with other smartphones as well, but these uploads are automatic and have managed to do away with the awk-ward fiddling needed to open Facebook

data centres were only running at ap-proximately 10% of capacity: in 2006 they launched Amazon Web Service (aws), and from there it was only a matter of time before other players entered the market. With Amazon estimated to be taking in over 700 million usd per annum as a result of their foray into the Cloud, who could blame them? Who could blame anyone?

what’s in a name?

The term Cloud Computing has been around for some years now, and can be attributed, in part, to Sean O’Sullivan, a panellist on the Irish version of Dragon’s Den (Zmajevo gnijezdo in Croatian but strangely never broadcast). At the time O’Sullivan, from Kinsale in the South of Ireland, was heavily involved in provid-ing software solutions for other firms, and it was he, along with George Favaloro of Compaq, who coined the term we all

By Lee Murphy

Apart from offering server space and leasing synced computers, T-Com has identified

three specific areas in which Cloud can be put to best use: Human Resources, Finance

and Accounting, and Vehicle Supervision.

june 14th

33

or Twitter and go through the trouble of attaching files, etc. As to how much time exactly this can save us over the course of a year may be a matter of debate but, as one Katy McCaffrey discovered, it can certain-ly save something of real, intrinsic, value.

It was in April, just a matter of weeks after the iCloud platform went online fully, when Katy had her iPhone stolen. The theft of phones is usually a terminal crime – they’re rarely recovered – but this was not to be one of those cases. The phone had been stolen while Katy was on a cruise and found its way into the pos-session of one of the staff members (we won’t debate whether he was the thief or whether he purchased it from a third party); however, because the phone had been synced to Katy’s other devices and social media, every photograph that our

‘villain’ took suddenly appeared on Face-book. The cruise organisers were quickly informed and, eventually, the matter was resolved. We’ve used the cliché ‘sync or swim’ before, but far too many users of modern technology are woefully naïve when it comes to doing all they can do to secure their 'investments'. Katy was not.

cloud & the business world

It’s wrong to think of Cloud Computing as being somehow different to the generality of the Internet: it’s merely an evolution-ary step. In the same way that our con-cept of the Internet is far more advanced

your server needs to a larger Cloud pro-vider: a company can save on security costs, energy costs (no longer a need for so much electricity or climate control), and it goes without saying that their original hardware might never have been running optimally in the first place.

Any company can calculate which the most profitable route is (although this might well be a case of trial and error) – all the board need do is ask their accountants to do the math. Efficiency is a little vagu-er: profitability cannot be used as a gauge here, as that does not necessarily indi-cate that the best services are being pro-vided. Thankfully the firms which might find such calculations the most difficult are exactly the ones that can use Cloud technology the best. If we consider, for instance, any hotel chain, it goes without saying that it will have many premises worldwide, and each separate hotel may well be subject to a variety of taxes, cur-rency fluctuations, wage structures, etc, which the next in line does not. In order to compare like with like, it is necessary to compare vast amounts of data, something which can be awkward when the systems are internalised and not always synchro-nised with other servers within the parent group. Taking advantage of more power-ful server technology (whether that firm invests in its own Cloud server or chooses to outsource to another company), that chain can now isolate all those variables and look at the data in a purer sense. Being able to identify troughs and peaks in busi-ness performance will allow any compa-ny, not just the larger chains, to alter their business model seasonally, or on a more regular basis, which hypertrophies its ability to adapt. Indeed, the benefits are many, and one need only look at Cloud-related services of the Croatian Telecom, the first company in the region which of-fers a fully integrated model. Apart from offering server space and leasing synced computers, t-com has identified three specific areas in which Cloud can be put to best use: Human Resources, Finance and Accounting, and Vehicle Supervision. With this in mind, seeing as the market for these services and solutions seems to be growing (as it would), we turn to Luxor Group’s Executive Director of Develop-ment, Mislav Kraljević, to discuss his company’s foray into ‘Cloud’ and conse-quent collaboration with t-com. ‘Hands on’, ladies and gentlemen, ‘hands on’.

to what we had 20 years ago, so too is Cloud a degree ahead of that. Companies, long before the Cloud debuted in 2001, already operated what could be called mini-clouds: internally operated server banks, all linked to whatever pc terminals were needed around their office buildings. One need only watch tv to see that every villain, every law enforcement authority, every multi-national entity have their own servers, oh-so vulnerable once our hero decides he needs to break-in.

This will soon be an anachronistic rep-resentation of how business is done. There are savings to be made by outsourcing

In the same way that our concept

of the Internet is far more

advanced to what we had 20 years

ago, so too is Cloud a degree ahead of that.

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SEE Luxor is a company with many strings to its bow: catering, cleaning, etc

– these are commonly understood activi-ties, but what of facility management? What, exactly, is facility management?MK I suppose that it could be confusing to someone unfamiliar with the industry. Quite simply, facility and property man-agement is becoming more and more important to the owners of commercial properties, mainly because it encom-passes such a range of operational activi-ties, which are naturally tailored to the specific needs of a client. It can include, as you mentioned, cleaning and cater-ing, but there is much more involved: technical maintenance of the building, landscaping, pest control, organisation of desk reception services, and a number of other related services. The advantage to having someone like ourselves com-ing in and doing this work is that the owner and their company can then de-vote themselves fully to their core busi-ness, assured that their facility is fully functional. That, in short, is what facil-ity management is: we enable our clients to operate more efficiently and help pre-serve the value of their properties.

SEE Cloud computing is essentially vir-tual computing – a user doesn’t need much in the way of infrastructure (no need for servers, or the warehousing to store it all). Does the switch to Cloud have much in the way of benefit for Lux-or in this regard? Is there a secret ware-house somewhere full of hardware? MK It’s not quite as glamorous as the movies might suggest. We currently have a server room, where there are four distinct cabinets. If you know an-ything about computers then you will know that they generate a tremendous amount of heat: you can imagine how much heat servers produce. Then, on top of that, the room itself needs to be highly secure: you can’t have it open to absolutely everybody; they’re deli-cate and expensive machines at the end of the day. There is a need for adequate ventilation and air-conditioning sys-tems as well, and the room has to have a secure, stable, back-up power-supply in case anything goes wrong. All of this costs money, and to have a specialist provider available to us is of immense benefit – and it does take a logistical burden off our plate.

SEE Ok, so you get to free up a room, and solve some logistics headaches, but why the switch? Luxor is clearly a successful company and has an existing business model. Was there any need to move to

‘Cloud’? Is this Luxor identifying Cloud as the future, or is there a degree of risk involved? MK There’s always risk involved in any business decision – it wouldn’t be a de-cision otherwise. There’s a certain de-gree of risk in ‘Cloud’, but that’s in no way greater than any risks we’d en-counter normally. In fact we’re of the opinion that the risk, in relation to our servers, is reduced by our switch to

‘Cloud’. There’s increased data secu-rity – data is being continually copied and backed-up so we can be sure that what we need is available when we need it. It makes our business much more dy-namic as well, since we can access that data without the need for any particu-lar personal computer, which might not even be in the same place as the person who needs it! Luxor has offices all over Croatia, so this move to the ‘Cloud’ sig-nificantly increases data exchange and accessibility, and we no longer have to worry about enforced downtime and in-activity because of loss or damage to our own hardware.

LUXOR GROUP

Luxor Group was founded in 2002 and is a

group of service companies which operate

in the regional market of Croatia, Serbia,

Macedonia, as well as in Luxembourg.

Luxor specialises in cleaning, catering,

maintenance, and facility management.

Today they employ more than 1,100 people

and have more than 400 customers: these

include Hrvatski Telekom, Hypo banka,

Allianz, Cvjetni Shopping Centre, Atlantic

Group, Croatian Television (HTV), and many

others. The services Luxor offers enables

them successfully to implement various

quality-management certificates such as the

Quality Management System ISO 9001:2008,

the Environmental Management System ISO

14001:2004, Energy Management System

16001:2009, Occupational Protection System

OHSAS 18001:2007, and the Food Safety

and Quality Management System HACCP.

SEE Well, it sounds like you’ve put con-siderable thought into all of this. I’m sure T-HT wanted to sell you a product, but you don’t strike me as someone who might have their head in the clouds, so to speak. MK We definitely considered the switch for what we felt was a reasonable pe-riod of time. We weighed up the costs involved in making the switch with our current annual costs: what did it cost for hardware updates; how much did it cost when we needed to invest in new equip-ment, etc? I won’t include the amount of money we’ve already invested into our own hardware because that can of-ten distract you from the best bargain – if the switch will cost us on a year-by-year basis then that’s what is most important; money already spent is not money we can recoup, so it should not factor highly in our decision-making process. Our goal is to be the leader in our industry. Past ex-periences have shown that the best path to success is through the continuous im-provement of service-levels, knowledge, efficiency and quality. It would be hard to argue that the ‘Cloud’ does not pro-vide all of these. SEE Like with any new technology, Cloud too has given rise to a new cyber-criminal element. Are you confident in

Mislav Kraljević, Executive Director of Development,Luxor Group

technology interview

june 14th

35

about hardware difficulties. This will help us generate more accurate data: the BMS allows us to compare like with like, ware-houses with warehouses, hotels with ho-tels, and the more accurate our data the better services we can provide to our cli-ents. If it transpires that we find ourselves overstaffed in one area because of this switch, then we can simply 'redistribute' those individuals, which is, in and of itself, being efficient. Given that we’re an ever-expanding company, I’d say that we’re far more likely to be hiring than firing.

SEE Cloud has some advantages, ob-vious even to luddites such as us: soft-ware updates, as needed, happen once, and once only, instead of several times all over the region. It’s clear that this is highly efficient. How does this translate for Luxor? MK Again, this saves us quite an amount of time, and, to reuse the term, it is highly efficient. There is no more need for man-ual upgrades, meaning that it is no longer necessary for so many on-site visits to do software installation – all of this is done centrally at the server farm, and since they can back up all our information we don’t experience any downtime. That’s ‘down-time’ in which we can be productive.

SEE Finally – what difference will ‘Cloud’ have for Luxor’s overall business, and, just as important, what difference will it have for your customers' businesses? MK The two, naturally, are intertwined: because ‘Cloud’ will improve and accel-erate the flow of information within the company we will be able to conduct our business with far more, that word again, efficiency. With more accurate data and information being available to us we will be able to provide an even better service to our clients, and they will get a better return on their investment.

the safety of these systems? I’m not go-ing to be getting spam emails from you, advertising products of dubious origin, am I? MK No, you can be assured that you won’t be getting spam emails from a Luxor email address. As I've already mentioned, the risks are pretty much the same as they used to be: except that by outsourcing our data storage we get the benefit of vastly improved digital security. After all, ad-vances in online security are being made all the time, and the server farms we out-source take full advantage of these im-proved programmes.

SEE BMSs – Building Management Sys-tems allow a company to maintain a building’s environment remotely: each building would have its own system, which is usually operated by a computer within the building itself. With ‘Cloud’, all of those will likely be operated off-site, back at headquarters. This reduces the need for as much on-site presence as Luxor might have right now. Are we looking at job losses? MK No: this is simply going to make our business far more efficient. The people who are currently responsible for moni-toring these systems can do so now, just as before, but without having to worry

“Again, ‘Cloud’ saves us quite an amount of time, and, to

reuse the term, it is highly efficient.”

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politics

In spite of his early moves, we dare predict that his political sacrifice will be the informal Serbian abandoning of Kosovo,

as well as a complete deflection away from Moscow.

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Those who do not learn from history are condemned to repeat it, or so the old adage goes. When we look at Ser-

bia’s recent elections, campaigning in-cluded, there would appear to be more than one thing which has repeated itself when compared to the past decade. On the eve of the 2000 elections Slobodan Milošević, feeling overly sure of victory, resigned as President and subsequently lost. Boris Tadić, with no small amount of similarity, resigned just prior to the 2012 elections and, despite expecting a victo-ry, lost as well. In 2000 the Serbian elec-torate did not vote for Vojislav Koštunica as much as they voted against Milošević

– and then it took some years to get rid of Koštunica. In 2012 it may be that the electorate have repeated their mistake by voting against Tadić: he polled 800,000 fewer votes than in 2008. But the peo-ple cast their die and now they must live with the outcome: the thing is, did Serbia actually vote for Nikolić by design, or by default? Will it soon turn into lamenting after the ancien régime?

breaking the silence

Quite remarkably, the new Serbian Pres-ident remained relatively silent during his first two weeks in Office. Of course this allowed his predecessor, Boris Tadić, to stew in his anger and discontent, all the while denying the possibility of building a so-called large coalition with Nikolić’s ‘Progressives’ of sns – although there was in fact no such offer officially on the table – and watch Ivica Dačić’s obvious backtracking in the harsh light of the Progressive’s Presidential victory.

Having had, in Boris Tadić, arguably the best-looking President in the region for nearly a decade, Serbia now has some very high expectations – at least

aesthetically speaking – from its politicians. But what else? Presidential Silver Foxes aside, the real question for the newly elected Tomislav Nikolić is

whether he’s fit for the job.

The Man of Two Oaths

ambiguous political programme, at least as far as foreign policy is concerned. “I assure you that the Serbia-Russia collab-oration will be progressive. I would also like to reassure you that Serbia is Russia's partner in the Balkans,” the new Presi-dent said.

The first explicit deflection from the existing political course was with respect to Kosovo, as could be expected: “Serbia is on the path to the eu... I am not aware that this is conditioned by Serbia’s rec-ognition of Kosovo and Metohija... We can never do it, even at the cost of stop-ping the negotiations”. Nikolić also reit-erated that Serbia is obliged to adhere to its military neutrality in accordance to its own parliamentary declaration and that

“Serbia would not join nato”, which, in Nikolić's own words, was the position on the basis of which he won the elections.

Back in Belgrade, Nikolić continued with his political exposé: addressing the neighbouring Montenegro, he said that its independence was a fait accompli but that there was no difference between Serbs and Montenegrins. This remark ac-tually had little political relevance, but it does have the potential to harm relations with Podgorica and people with strong local feelings, especially in the face of the ex-Yugoslav republic's internal strug-gle for identity and state symbols, strung between the Serbian and Montenegrin ‘dichotomies’.

If it appeared that Nikolić’s statements were inflammatory, or had the potential to be, then that was exactly what his next offering was: “There was no genocide in Srebrenica”. These were his exact words. Although he would go on to explain that

Behind this silence Nikolić, in the man-ner of a wise statesman, was biding his time and carefully listening to how his appointment was playing out on all lati-tudes, from Moscow to Washington (he ranks those two cities in that order as well), and, in-between, in the ex-Yu-goslav capitals. Barring the rumblings of concerned journalists on various social media sites, there was a dearth of com-ment coming from Governments around the world: it would be Nikolić who would have to speak first.

Nikolić’s international debut, though made before he formally assumed office, was a State visit to Moscow – a bit of a cliché in its own right. There he had the opportunity to unveil what would seem the real face of his party’s heretofore

By Miša Milošević & Igor Dakić

Nikolić’s prior statements

my have been inflammatory,

but this offering was literally

caustic: “There was no genocide

in Srebrenica”.

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38

it had certainly been a massive crime, this denial went not only against the exist-ing consensus between Brussels, Belgrade and the entire region, but it also open-ly repudiated the International Tribunal in The Hague, which clearly decreed the events in Srebrenica as an act of genocide, the same tribunal which Serbia consult-ed with regard to the Kosovar self-pro-claimed independence.

And so the President's seemingly sage silence at the beginning quickly shattered into three serious instances of verbal ef-frontery in the space of mere two weeks, justly raising questions about his inten-tions, his transparency and - having in mind his much greater responsibility than in the role of an mp - his fitness for the job.

the last true right wing paradox in the balkans

Tomislav Nikolić is the man of two oaths: he gave his first oath 19 years ago, in the torrent of the Bosnian war in which he took part as a volunteer, and during

nationalistic elements: the core, in fact, of Nikolić’s own electorate which he, mo-rose, scruffy, and monoglot as he is, per-sonifies to a nicety. Or such is, at least, the general perception.

Strange as this may sound, this may be one of Nikolić’s principal advantages, the fact that he rather ‘looks’ bad. For a coun-try cannot thrive on good looks alone, es-pecially if there is no national consensus in place as to how to get the economy go-ing, and how to resolve the single biggest national issue, which is Kosovo. When a country is in the dire straits, as Serbia is overall, it needs to rally up all its forces; and, as is usually the case, the hardest de-mographic to set on the right track are the generally disenfranchised, downtrod-den Right wing voters, whose only po-litical and intellectual solace is that there is someone – preferably another ethnic group or neighbouring country – who is even worse (off) than them. Nikolić com-mands an army (and arguably heads a party) of people who cannot live without a natural enemy, in an overly centralised

since he has a wonderful precedent to learn from, in a very recent past and in a very familiar country to boot.

For, roughly a decade ago, Croatia found itself in a very similar predicament.

After the death of Franjo Tuđman, in the year 2000, a wide coalition led by the Social Democratic Party took power but couldn’t hold on to it for more than one (very tumultuous) term: memories of the War were still fresh, and Croatian society wasn’t yet ready for technocratic political options bereft of a strong ethnic prefix.

So, in 2003, the Croatian Democrat-ic Union would take over once again, now under the leadership of Ivo Sanad-er, former Head of Tudjman's Cabinet and, initially, a very ‘loud’ national-ist himself. His tirades against the SDP-led government’s practice of extradit-ing Croatian generals to The Hague won him the Election, yet he is precisely the man who extradited General Gotovina

– or helped create the sort of climate in which this was possible – and persuaded

However, more than having only to reconcile words of past and present, Tomislav Nikolić will have to rise to a much tougher occasion,

for Serbia is a polarised society that has to regain faith in itself.

which he was promoted to the position of a Chetnik Duke (‘vojvoda’) by his then party chief, Vojislav Šešelj. His mission: to reinvent the united Serbian state, or a Greater Serbia, which would encompass all territories inhabited by Serbs. His sec-ond oath to the State of Serbia was given just a matter of weeks ago, when he was sworn in by the President of the Serbian Parliament in the ceremonial transfer of duties.

However, more than having only to reconcile words of past and present, Tomislav Nikolić will have to rise to a much tougher occasion, for Serbia is a polarised society that has to regain faith in itself. On one hand there are the for-ward-looking and ardently pro-West-ern forces – in many ways epitomised by the ‘civilised’ but comparatively ineffi-cient Tadić – whilst on the other there are the retrograde, ‘rustic’ and vehemently

country marked by low wages and a high unemployment rate. In other words, he just may be the man who can pull off the unimaginable: write Kosovo off, which of course is a must if Serbia intends to be-come fully integrated into the Western world. In immature societies, it is very difficult for well-mannered mannequins, such as Tadić, to get things truly done, as they cannot control the large mass of po-tentially volatile social and political inter-est groups. A ‘man of the people’ – wheth-er phony or not is not the issue here – such as Nikolić, furthermore bearing the title of a Chetnik Duke, just might be the answer.

Awfully pragmatic, all this – let us call it a populist right wing paradox, where-by democratically elected nationalists get things going by the faculty of their limita-tions and ‘bad looks’ – and let us hope that some of this pragmatism will not be lost on the new Serbian president, especially

Generals Čermak and Markač to turn themselves in. His anti-Serb sentiments won him the Election, yet he is precisely the first Croatian Head of State who pub-licly wished a happy Christmas to Eastern Orthodox Christians, which in Croatia amounts to Serbs. And so on, all the way to Croatia signing the Accession Agree-ment with the eu, a long negotiation process during which he himself bore the brunt of the effort, his later problems with the Law notwithstanding. These authors are of the opinion that a Left wing Balkan government, in this period, couldn’t have achieved the same, at least not without avoiding major clashes within the ranks of the Croatian population, which is as polarised – and along identical lines – as that of Serbia.

And here is where we’ve run a full cir-cle. Although Nikolić's agenda is free from Hague warrants, we dare predict that his

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political sacrifice will be the informal Ser-bian abandoning of Kosovo, as well as a complete deflection away from Moscow. We can also add to the equation the need for regional reconciliation, which will be expected of Nikolić as it would be expect-ed of any Serbian president: he will need to renounce his own words and deeds, giving up at least a part of Serbia’s sov-ereignty as it is perceived by him and his electorate.

two brothers ride together again?

Back to reality, the elections results might yet give us a hint: both Nikolić’s sns and Dačić’s sps have reasons to claim elector-al victory. Both parties seem to have risen back from the lows of the past – and in-deed they actually do share the same past: Ivica Dačić was the long time spokesman and Deputy President of the Milošević-ruled Socialist party, the Serbian war-mongers; Nikolić, on his part, was Vojislav Šešelj's deputy and right hand in the ex-treme-right Serbian Radical Party during the same period. In simplistic terms, one was a volunteer in the battlefield, while the other was helping the Commander in Chief. So what exactly makes Tomislav Nikolić less appropriate for the presiden-tial function than Ivica Dačić?

One last comparison, though it is un-likely that the two would enter into a coalition agreement: it is their positions that make the whole, and possibly the only, difference. Although Ivica Dačić, the Vice-pm and Minister of the Interi-or, clearly had important work and was even voted the best performing member of Serbian Government, he was never in the political spotlight: he was comfort-ably shaded by Prime Minister Mirko Cvetković and the ‘actual’ Prime Minister, President Boris Tadić himself, and was exhibiting his approved operational ex-cellence. For Nikolić, it is all different: he has nobody to hide behind. On the con-trary: he will have to personify many of the things which the Government and the nation will be forced to do.

When Tomislav Nikolić cites “a French philosopher” who said that “only a fool never changes his opinion”, it seems that he will have to change his own a great deal more than he may currently think. And let us hope he will, for the alternative is unspeakable.

JOSIPOVIĆ MISSES NIKOLIĆ’S INAUGURATION

Political consensus is something which is

rarely reached in Croatian politics, and yet

such a moment has come to pass with regards

to President Ivo Josipović’s (non)attendance

at his Serbian counterpart’s inauguration on

June 11th. Circumstances have dictated that all

the political forces within Croatia have found

themselves sharing the same opinion: a person

who has been caught saying that Vukovar is a

Serbian city, and that there was no genocide

committed in Srebrenica, does not deserve

to be honoured with the presence of the

Croatian President at his inaugural ceremony.

Although Tomo the Undertaker’s loose dialogue

was deemed abhorrent by both the regional

and European officials alike, Ivo Josipović, being

his usual diplomatic self, explained that in spite

of Nikolić’s invite, extended in a TV interview,

he had never received a formal invitation, as is

customary protocol. It has been suggested that

Josipović is boycotting the event in response to

former Serbian President Tadić having refused

to attend the Croatian’s own inauguration, on

the grounds that Kosovan officials had been

invited. Josipović and Tadić, both friends

outside of the strictures of regional politics, did

meet afterwards and confirmed the principles

on which a stable bilateral relationship is to

be built: a relationship which remains to this

day, at least for now. With this latest shift

in power, it remains to be seen what will

become of Croatian-Serbian relations now

that a former Chetnik ‘Duke’ (though warlord

would be a more fitting appellation) is the

new Serbian Head of State, his half-hearted

extensions of friendship notwithstanding.

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A Bosnian ReshuffleBosnia and Herzegovina has provided us with yet more political theatre.

Even as the Federal budget for 2012 was being passed, the Party of Democratic Action (sda) were being removed from Government on the cantonal level, to be replaced with the Alliance for the Better Future of

Bosnia & Herzegovina (sbb). Paula Abdul couldn’t have sung the song better herself.

By Dylan Alexander

It almost appeared as if things were starting to look up in the troubled land of Bosnia and Herzegovina: a six party

consensus had ushered in the State Aid and Census Laws, decent headway was being made in the implementation of the Sejdić-Finci ruling, and at long last Bos-nia and Herzegovina had a budget (over-due but confirmed nevertheless). Before any celebrations could begin, the news broke out that sdp were looking to enter into coalition with sbb, meaning the end of the road of their arrangement with the sda (a coalition considered unnatural by many in the public to begin with).

That sda had failed to back the budget was given as the justification for the break-up of the coalition, even though the budget made it through the House of the Peoples of the Bosnian and Herzegovinan Parliamen-tary Assembly. Sulejman Tihić, a leading member of the sda, voiced his discontent that there was not enough funding allocat-ed towards defence: sda felt that this was an impediment to b&h’s entry to nato and duly opposed the budget. It was, of course, touted that sda had a vested interest in pro-longing the temporary financing arrange-ment which had been in situ and that their nato argument was merely an excuse; no one could honestly expect an increase in military spending in a country which is on the brink of bankruptcy.

There is a bright side, of course: al-though sda are somewhat reformed, they are nevertheless a nationalist party; many of the Bosniak electorate had felt that sdp should have entered into coalition with a more progressive party – a party like sbb, led by Fahrudin Radončić, an entrepreneur and media magnate who owns the daily

newspaper Dnevni Avaz.The talk emanating from this newly

forged civil alliance is all about progress, both social and economic; the absence of such talk, until now, has naturally been lev-ied on sda. While Tihić, perhaps with good cause, is calling out Lagumdžija and his lot for incompetence and opportunism, sda of-ficials at the cantonal level are being ousted and replaced by members of sbb. As for the Council of Ministers, Lagumdžija is turning to Bevanda so that he, as Chairman of the Council, can revoke the Ministerial man-dates held by sda.

The ball is rolling, which is all very well and good, and it even seems as though some prospects for social (if not economic) bet-terment might be shaping up. Alas (when dealing with Bosnia and Herzegovina there is often an ‘alas’), any attempt at change on a federal level needs to be authorised by the Federal President Živko Budimir, of the Croatian Party of Rights, and co-signed by his deputy who is, unfortunately enough, one Mirsad Kebo of sda. Under the circum-stances, it would be asking too much to ex-pect him to comply with any such reforms.

That said, we just might be looking at a dangerous period of interregnum, possibly no progress in the implementation of the Sejdić-Finci case, which will mean no green light when it comes to eu accession talks. Oddly, there is one specific, ardent, sup-porter of this new coalition, and that is Mi-lorad Dodik, a man who, to say the least, has a vested interest in further destabilisation of the country. A political pragmatist of the first order, he just loves those situations when it gets even more difficult to pass legislation in a country in which passing new legislation is virtually impossible in the first place.

event horizon

Fahrudin Radončić

In the light of recent events, we just might

be looking at a dangerous period

of interregnum, which will mean no

green light when it comes to eu

accession talks.

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Montenegro: The Beginning of a New Chapter

Montenegro hasn't had it easy the past number of months, or years if truth be told. If we must be completely honest, they've had a

tough six years. That, however, might yet change: despite being the youngest of the region's countries (Kosovo excepted), they might

well be racing their larger neighbour Serbia to the finish line.

By Dylan Alexander

Prva banka Crne Gore and its bail-out, and former Prime Minister Mi-lo Đukanović and the (alledged) to-

bacco smuggling: certainly Montenegro has had its fair share of political missteps the six short years it's been in existence. Igor Lukšić, the Prime Minister, has al-so had his few moments in the lime-light, with repeated protests led by Vanja Ćalović and the Network for the Affirma-tion of the ngo Sector (mans). It might come as some relief to our readership, as indeed to us in see, weary of yet another critique of Montenegrin politics, that the beginning of the end (if not the end itself) may well be in sight.

On May 23rd of this year the European Commission recommended the official opening of accession talks between the European Union and Montenegro. Like many of the countries in the region, Mon-tenegro sees the European Union as its (ultimate) natural habitat. Not only would Montenegro benefit from the various structural funds, but an expanded mar-ket would, ideally, bring added economic prosperity. None of this is anything new, but now that Montenegrin entry to the European Union has taken a major step forward, we need to look at how likely eventual entry actually is.

We were fortunate to speak with Dra-gan Mugosa of the eu Delegation in Mon-tenegro, who told us that the eu was de-termined to be thorough in their vetting processes, likely only too aware of the damage the Greek ‘deception’ has caused to the Union’s reputation. Montenegro,

specific problems with the recent (or near-future) accession States. “Spe-cifically, the Commission has proposed a new approach in accession negotia-tions, whereby issues related to the ju-diciary and fundamental rights and to justice, freedom and security (chapters 23 and 24) will be addressed from the very beginning to the very end of acces-sion negotiations.” A chapter, generally speaking, would last approximately six months, but by beginning with chap-ters 23 and 24 (and keeping them open throughout the process), the overall ne-gotiations gain a greater air of authority.

“The Commission would report regularly, at all stages of the process, on progress achieved in these areas along milestones defined in the action plans,” finished the delegation official.

Montenegro has reached a milestone: the eu accession talks will confer a certain amount of legitimacy on Lukšić’s Govern-ment. The trick is for mans, and other bod-ies like it, to find their place in this new Montenegrin future. May it come soon.

also, would need to prove that their entry was earned, not just some sort of political ‘making up the numbers’.

“Strengthening the rule of law remains a major challenge for most enlargement countries,” Mr Mugosa told us, “includ-ing Montenegro. It is a crucial condition for moving towards eu membership. The European Commission will continue to prioritise reforms in Montenegro, in the judiciary and in the area of public admin-istration, the fight against organised crime and corruption, including regular moni-toring of the implementation of reforms.” Mr Mugosa was quick to point out that this was not an indictment of Mon-tenegro, merely the protocol that must be observed. “The experience we ac-quired from previous negotiations (with Croatia, as well as Romania and Bulgar-ia) will benefit any future negotiations with countries wishing to join the Eu-ropean Union, and that includes Mon-tenegro.” Again, it was underlined that this ‘experience’ was simply best prac-tise, not that the Commission had found

eu accession

PM Lukšić and President of the European Commission J. M. Barroso

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Aman Resorts

destinations

It took five years of reconstruction and refurbishment (the sort of work that would warrant its own television series on satellite

these days), but Hotel Sveti Stefan opened its doors in 1960.

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Picture, if you will, an historic fortress-town, an island, and a five star resort, all rolled into

one. No, this isn’t The Twilight Zone, but rather the Aman Sveti Stefan Resort which,

after four years of reconstruction, has finally reopened only this April. The reopening proved

a fitting excuse, as if one was needed, for us to visit Montenegro and see for ourselves what

has become of the fabled Saint.

Sveti Stefan: Crown Jewel of

Montenegro

band of brigands, hailing from Paštrovići, raided a Turkish galleon, and came away heavily laden with riches. This wealth was then used to fortify the island: twelve houses were built within the walls, one for each of the Paštrović clans. This new settlement, intended for use during tu-multuous times, evolved over time to be-come a centre of commerce between the local populace and the Venetian Repub-lic. The community’s society also evolved with its Judiciary passing rulings from a balcony, now called ‘the place of justice’, atop the city gates.

The eventual downfall of Venice marked the end to the lucrative trade en-joyed by the island, and though the fish-ermen were still able to ply their trade it would be to no avail: from the 19th cen-tury onwards there was already a steady exodus in progress. By the time of the Bal-kan Wars, on the eve of the Great War, just thirty families resided on Sveti Stefan. Just eleven of those remained in 1955, at which time they were relocated, by the State, to purpose-built houses on the coast.

The Yugoslav Government, at first, in-tended to turn the now-deserted island into an artist’s colony but, after some

Few places, if any, like Sveti Stefan exist in the world. The island, which covers an area of 12,400m², is com-

pletely urbanised and is connected to the coast by a narrow isthmus. Named after Saint Stephen the Martyr, it can be found in the centre of the Montenegrin Adriat-ic Coast, nestled between the foothills of the Lovćen mountain range and the vil-lages of Pržno and Sveti Stefan. There is a church dedicated to the eponymous Saint which sits on the highest point of the island.

During the 1950s, following a long and gradual depopulation, the island’s re-maining denizens were relocated and the original hotel commissioned. The story of this transformation is a curious one: in contemporary terms it has become quite the romantic tale, and is certainly shrouded in myth and legend.

the history

Local lore tells us that a fortification was built on Sveti Stefan in 1442 ad, and was intended for use as a refuge, by the sur-rounding population, from the onslaught of pirates and the Ottoman Turks. A

By Miroslav Tomas

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consideration, decided instead to push ahead with plans for a town-hotel. It took five years of reconstruction and refurbish-ment (the sort of work that would war-rant its own television series on satellite these days), but Hotel Sveti Stefan opened its doors in 1960. Marshal Tito, naturally, was the first to sign the guestbook. As a concept it was quite groundbreaking for its time, and over the decades it became a hallmark of the Yugoslav tourist indus-try. The island catered to both the socialist elite and the global jet-set alike.

In addition to the numerous Soviet marshals and other Communists of note the island saw, as guests, a truly capti-vating parade of celebrities: Yuri Gagarin, Kirk Douglas, Sophia Loren, Mikis Teo-dorakis, Monica Vitti, Gina Lolobrigida, Claudia Schiffer, Jeremy Irons, and Syl-vester Stallone are only but a few of the famous names who spent time here.

the five star present

Sveti Stefan saw a decline in popular-ity following the breakup of Yugoslavia and was nothing more than a shadow of its former glory by the turn of the cen-tury. A fin-de-siecle destiny, if there ever was one. In 2008, however, a Singapore-based resort group (Āman) was awarded a 30 year concession – the maximum al-lowed by law – for the island and they be-gan immediate extensive and painstaking works which gradually restored the island to former glory, and then some. The entire process cost the investors approximate-ly 60 million Euros, but it may well have been a cost worth bearing as ‘The Saint’ was fully reopened in April of this year.

After a drive that took us from Du-brovnik down the coast to reach the land bridge, we thought it only right that we kick back and enjoy a glass of brandy amidst the splendid surrounds of the ci-gar lounge: the weary driver settled for mineral water. We found ourselves recall-ing, if somewhat vicariously, the events of some years back when a colleague of ours found himself trapped by the huge wildfire that was sweeping the environs of Budva, as it drove a mass of unsettled tourists to take refuge, as others had done centuries before, on ‘The Saint’. Much has changed since: what was, ten years ago, a relatively dilapidated resort cater-ing mainly to the (disenfranchised) Ser-bian and Montenegrin elite and the odd

semi-wealthy Russian, is now a top-of-the-line, well thought through hospital-ity industry affair. In other words, Sveti Stefan is what it should be.

Having finished our drink (and a sly cigar) we felt obliged to take a stroll around the island, if only to witness, for ourselves, the famed white stone façade and red brick roofs of ‘The Saint’ shining once more in all their historic splendour. Later we were treated to a tour of the ho-tel’s interior which was, as explained to us, a blend of traditional detail and de-signer furniture, put together by Mary Lou Thompson and her team of Denniston architects. This sort of luxury is anything but tasteless.

Having seen the entire island for our-selves it was wryly remarked that ‘The Saint’ might yet become a refuge once more, but this time not for the clansmen of Paštrovići or masses fleeing a wildfire: future refugees here are more likely to be global celebrities and the hoi polloi on the run from the camera-clicking pa-parazzi. Once again.

What was, ten years ago, a relatively dilapidated resort, is now a top-of-the-line hospitality industry affair. In other

words, Sveti Stefan is what it should be.

Aman Resorts

Aman Resorts

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THE FISCHER-SPASSKY REMATCH

The most curious event related to Sveti Stefan

took place in 1992, when the town-hotel

became a venue for a chess match between

Bobby Fischer and Boris Spassky. The match

between the two grand masters was long in

the waiting, ever since 1972 when Fischer

had won the title of World Champion from

Spassky in Reykjavik. Montenegro, as part of

Yugoslavia, was under International sanctions,

and the contest, though unofficial, was highly

anticipated, not least of all on account of

every manner of controversy Fischer had

been courting for several decades. Openly

sympathising with Milošević’s regime,

avoiding to pay taxes every chance he got,

Bobby Fischer would soon after the event be

stripped of his US passport and live out the

remainder of his days wandering the globe.

The Beach Club, The Queen’s Chair, and Loggia at Villa Miločer.

We came, we saw, we enjoyed (and we want to come back). Suffice it to say, it is a magnificent destination. All those who have seen what we have seen will un-doubtedly concur, and to those who have yet to enjoy Sveti Stefan we can only say this: we urge you to consider it for your next holiday. Time permitting, we’ll be back ourselves.

chat, gave us a take on what Aman Re-sorts has planned for ‘The Saint’: “a small portion of the island is still un-dergoing some restoration and will be ready in time for the 2013 tourist season. We’ll also have the Queen’s Beach Ho-tel which, while not part of the resort as such, will be operated by the hotel man-agement.” The Executive Director also informed us that the general response from the tourist industry was extremely positive and that a successful season is expected. The resort sees a number of off-resort guests making the trip to the island just to sample the menu at one of the island’s restaurants: The Olive Tree,

We came, we saw, we enjoyed

(and we want to come back).

Suffice it to say, it is a magnificent

destination, and we can only urge you to see for yourself.

aman and the future: a dash of luxury

The resort encompasses the islet and Villa Miločer, former summer residence of the Karađorđević family, together with two kilometres of coastline featuring pink sandy Miločer, Sveti Stefan and Queen's beaches. The tourist coming here is very much spoiled for choice – there are 50 lo-cations to choose from on the islet, and eight more in Villa Miločer. These range from village rooms which cost 750 Euros per night, to separate cottages and grand suites with the most prestigious of all, the Sveti Stefan Suite, likely to set you back a cool 3,000 Euros per night. You get a pri-vate swimming pool with that, though.

We were able to arrange a Skype con-ference with Aman Executive Director Mrs Trina Dingler Ebert who, in a friendly

Aman Resorts

Aman Resorts

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Tech & TrendyThe summer is just around the corner and it’s not unlikely that many of you reading this will want to stay connected with home, or the office, but doing

so from somewhere a little less dreary. We’ve picked out a few devices which might make keeping up with your work a bit more enjoyable.

good stuff

Apple » iPod touch

Smartphone » Samsung Galaxy S3

Tablet » Toshiba Thrive

Notebook » Gigabyte X11

From its venerable beginnings when it was 'just an MP3 player', the iPod has evolved... and then some.

This latest top-of-the-line version, marketed as the iPod touch, resembles (in its exterior) the ubiquitous

iPhone, except for its distinctive chrome-plated back. Given that it’s just like the iPhone (only minus the

GSM module), you just might find it ‘convenient’ to leave your phone at home and still be able to access

email, surf, or use Facetime to message and video-chat with your friends. The iPod touch also utilises the

iCloud feature so the device automatically syncs with your other Apple devices or your home PC.

The Galaxy S3 is the latest in the series of Samsung smartphones, and will be debuting worldwide this

month. This member of the Galaxy S family, a family which leads the way when it comes to smartphones,

is, naturally, tied to the Android platform. It features enhanced voice-control capabilities together with

a more powerful processor which will enable the user to operate more than one application at a time

without running the risk of the phone freezing or crashing. It comes with a new face recognition system

which monitors eye movement and which will keep the 4.8” screen from switching to standby if you

happen to be looking at it – something which will be of immense benefit to anyone using it for lengthy

PDF or Word files. There’s also Direct Call, whereby, by simply lifting the phone to your ear, it will dial the

number of an incoming SMS. Now that’s a smart phone.

You can’t talk about gadgetry and not talk about tablets, and the Toshiba Thrive is one of the most versatile

tablets available on the market. Coming in two sizes (10.1” and 7”), it exhibits exceptional versatility and

power for a wide range of user-types. It can easily accommodate large amounts of external data thanks to

its dual core processor, and it also has an inbuilt file manager application which makes information transfer

and exchange as simple as it might be on a regular desktop computer. With stereo sound and two cameras

(front and rear facing), it can also accommodate a number of USB driven peripherals, such as keyboards,

cameras, printers, etc. While it’s not as slimline as some of its more ‘hip’ competitors, the Thrive will be

getting an upgrade from the Android 3.2.1 platform to 4.0 sometime over the coming weeks.

Weighing in at just 975g the new Gigabyte X11 is the lightest notebook on the market, thanks to

carbon fibre casing and aluminium hinges. This 11.6” notebook boasts 4GB of DDR3 RAM, an Intel Core

3 processor with HM77 Express Chipset, and Intel HD 4000 graphics card… in fact we could easily

spend a page listing all of the cool stuff it has packed inside it. We’ll try and keep it a touch more

simple and tell you that it can easily fit into the side pocket of a pair of cargo-pants. It’s comfortably

the ideal choice for anyone who wants to keep an eye on their email whilst out and about, or for

someone who, heaven forbid, wants to do some actual work.

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to-do list

Ensemble Lucidarium Ljubljana Castle, Ljubljana (19h)/

Business LobbyingSerbian Chamber of Commerce, Belgrade (10h)

/

53rd Ljubljana Jazz FestKrižanke/Cankarjev dom/Šiška, Ljubljana/

Hommage Tino PattieraRector's Palace Atrium, Dubrovnik/

Beton Fest 2012 Sarajevo/

Innovation Lab 2012Sarajevo/

7th INmusic festival Jarun, Zagreb/

Rezidencija 55 OpenNational Tennis Center, Zagreb/

Ballet Gala ConcertNational Theatre, Belgrade (20h)/

StingArena Zagreb (20h)/

Profitable Growth Today Madlenianum Theatre, Belgrade (11h)/

3rd Vivaldi ForumMokra Gora/

MESAP 2012Nedelišće/

German Authors Evening HNK, Zagreb /

Radio And JulietMestni trg, Ljubljana (21h)/

Italian ensemble performs medieval and renaissance music

Prof. Daniel Gueguen on lobbying in the EU

Jazz festival: John McPhee, Neneh Cherry, Peter Evans and many more...

Dubrovnik International Opera Festival

3D street paint festival

IT innovations conference

Biggest Croatian openpop/rock festival

ITF Nec Wheelchair Tour - international tennis tournament

National Theatre ballet orchestra concert

Pop music icon performs in Zagreb

Lecture by Isak Adizes, the world's leading management expert

Mokra Gora School of Management Macroeconomic Forum

14th International Entrepreneurship Fair

Contemporary ballet by Marco Goecke and Uwe Scholz

Dance inspired by Shakespeare’s tragedy set to the music of Radiohead

June 15th - June 17th

June 16th

June 18th June 22nd

June 27th

June 20th

June 21st - June 24th

June 21st

June 19th June 28th - June 30thJune 27th - June 30th

June 25th - June 27th June 28th - June 30th

June 28th - June 30th

June 27th - July 1st

Radio And Juliet Isak Adizes Sting

june 14th

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FORMENMen's strength in a capsule

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