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Update No: 060 - (18/04/02)

Political turmoil
The Croats are experiencing a spell of political turbulence that could lead to early elections. The instability arose when the leader of the Social Liberal Party (HSLS), Drazen Budisa, rejoined the coalition. 
Another source of tension is the emergence of the right-wing nationalist, Ivic Pasilic, as the likely leader of the Croatian Democratic Union.

Economy on the mend
The Croatian president, Stipe Mesic, is a popular figure above the fray. The Premier, Ivica Racan, is a big improvement on the premiers of the 1990s. He has really pushed through reforms, where his predecessors stalled. In the two years he has been in power GDP has at last began to grow. It rose by 3.7% in 2000 and by 4% last year, while inflation has been in low single figures. The one black spot is unemployment at officially 22% of the work force, but almost certainly at 30% or more in fact.

EBRD to the rescue
Croatia needs to go further with reforms of its economy if it is to carry on recovering. Racan is aware of this - Mesic, who conducts much of the official visits abroad, met with EBRD representatives recently in London and agreed to a further programme of loans to the republic. These are naturally also being coordinated with the government. There are over 35 projects under way with the EBRD involving 2.8bn Euros. Another 300m Euros is in the pipeline. 
Among the most important projects which the EBRD is participating in Croatia are contracts with the VIPnet mobile network and the Vetropack bottle production factory. As for significant infrastructure projects, the EBRD is involved in the building of the Zagreb-Rijeka motorway and a liquid waste management plant in Zagreb.
Lemierre said the Bank would work together with Croatia, taking advantage of this year's momentum and strengthening the market economy. He added that one of the most important priorities for Croatia would be privatisation, particularly in the tourist sector, the Bank statement read.

Foreign investment to the fore
Foreign investment has been coming in satisfactorily of late, reaching US$4.2bn by the end of the last year. But then Croatia is a natural gateway to the entire Balkan region, on the Adriatic and with a strategic location in the north-west. With great tourist potential and an educated population (the one undoubted achievement of communism), it has excellent prospects, with EU membership beckoning down the road.

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AGRICULTURE

Croatian foreign minister opens European agricultural forum

Croatian Foreign Minister Tonino Picula opened the forum of agriculture ministers from 11 countries on the northern Adriatic archipelago of Brijuni on 22nd March HINA News Agency has reported.
The forum is called "The Expansion of the EU and Agriculture Between Political Visions and Practical Experiences."
Picula said that Croatia, as a sovereign, responsible and economic country with healthy economic conditions, was oriented towards the European Union and foreign investors.
The forum gathered ministers and representatives of foreign ministries from Slovenia, the Czech Republic, Poland, Italy, Romania, Hungary, Germany, Bulgaria, Slovakia, Macedonia and Croatia.
According to the Croatian foreign minister, the main task of the Croatian government is the gradual joining to the European economic system and promoting regional cooperation.

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BANKING

German bank will relinquish its stake in Croatian lender

Germany's Bayerishce Landesbank will give up its 60% share in a leading Croatian bank after losing an estimated US$90m in foreign-exchange trading, a senior government official said, the Wall Street Journal Europe has reported.
"The BLB will give up its share worth €70m to the government and the government will repair the damage" caused to the bank by the loss, said Deputy Prime Minister Zdravko Linic.
Mr Linic, who met BLB executives, didn't elaborate apart from saying that the government's plan for salvaging the Rijecka Banka wouldn't burden taxpayers or interrupt bank operations.
Rijecka Banka, which dominates the banking industry in northwestern Croatia, made news after police reported the arrest of its chief foreign currency trader, Eduard Nodilo, on suspicions of illegal trading with the bank's foreign-exchange funds.
According to police reports, Mr Nodilo allegedly made risky transactions and lost money in the dollar-euro trade. Instead of reporting the losses, he allegedly falsified reports.

Banks bidding for purchase of Rijecka bank named

Belgium's KBC Bank, Bank Austria Creditanstalt (part of the HVB banking group), and Erste Bank from Vienna have to date submitted their binding offers for the purchase of Rijecka bank, the director of the State Agency for the Protection of Savings Deposits and Bank Rehabilitation (DAB), Marinko Filipovic, said on 3rd April, HINA News Agency has reported.
He estimated that all three offers were very good and worthwhile and that each was valued at more than 100m euros. The offers are in line with what were expected and include the infusion of additional capital and purchase of shares from the state and small shareholders, Filipovic told HINA.
DAB's board is to decide on 5TH April about accepting one of these offers, Filipovic said and announced that the sale of Rijecka bank should be finalised in about 10 days.

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FOOD & DRINK

Croatian food giant opens plant in Serbia

Podravka's [Croatia's largest food producer] goulash, hash and ragout are being produced at the Srem Sid meat industry in Serbia as of 25th March, HINA News Agency has reported. 
The initial production of meat products is planned at about 80 tonnes for the Serbian market, the Croatian company's officials said.
The meat industry in Sid will secure the necessary raw materials and production capacities for the production of Podravka's meat products, and Podravka's technologists from Koprivnica will take care that they meet the company's standards.
The production of the goods in Sid makes it possible for their sale in Serbia, where Podravka is still not present because of an import ban on beef products. This will make Podravka the first foreign producer and distributor of meat products in Serbia, the company's officials say.
Dusan Tomasevic, the executive director of Podravka's meat company Danica, said that the production in Sid would also make it possible to purchase raw materials based on beef for the Serbian market, which is important because of their lack on the Croatian market and the inability to import them.
He said Podravka's goal was to enter the Serbian market and take on the leading position as producer of meat products.

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FOREIGN LOANS

Croatian port authority expects World Bank to grant modernisation loan

By the end of the year, the World Bank is expected to grant Croatia a long-awaited loan to the tune of US$150m for modernisation of the port of Rijeka and Rijeka's road network that would link its main port with central Europe, HRT1 TV reported. 
The US$150m loan is the largest one to be granted to Croatia by the World Bank. Negotiations have been going on for over two and a half years, thus indicating the serious nature of the project and the faith in the future of the port of Rijeka. Resolving the problem of Rijeka's transport infrastructure and especially building roads to link the container terminal with the main road to Zagreb and further to central Europe via the Rijeka bypass is of vital importance for the development of both Rijeka and Croatia... 
The sum of US$50m is earmarked for modernising the port which this year expects to handle 3m tons of cargo and 21,000 containers.
Bojan Hlaca, head of Rijeka port authority, said: "Most of the money will be invested in building a new terminal for handling traditional cargo in the western section of the port. This will require pulling down old storage facilities."
Two-thirds of the loan or US$100m will be invested in building the Rijeka bypass. Some of the participants described the round table at which the modernisation project was unveiled, as critical for the World Bank decision. Without a World Bank loan, the development of either the port or the town itself would be impossible.

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INDUSTRY

Belisce successful in Valkarton take-over-bid

Belisce, Croatia's biggest cardboard packaging manufacturer, has acquired a majority 63.84 per cent stake in Slovenia's largest packaging producer, Valkarton, New Europe has reported
The Croatian firm had offered 7,530.44 tolars (33.6 Euros) per share. On February 6th, Belisce received approval from the Slovenian Securities Market Agency for the take-over, while the Slovenian anti-trust office decided on March 19th that the merger would not violate competition rules. Valkarton, which has enjoyed long-term business ties with Belisce, believes that a change in ownership structure is a logical consequence that will benefit the company's development and future, as Valkarton can only be successful if it is part of a larger group, Slovenia Business Week reported. Belisce generated net annual revenues of some 80m Euros last year, 55 per cent of which were made on foreign markets. With the merger, Belisce stands to become the region's largest paper producer in the region.

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SHIPPING

Croatian yard delivers two ships to Italian client

A ship for the transport of 4,300 automobiles, built for the Italian corporation Grimaldi, was launched at the Uljanik shipyard in the northern Adriatic port of Pula on 6 April, HINA News Agency has reported. 
The Grande Portogallo is the fourth ship Uljanik has made for Grimaldi. The ship is 176 m long, 31 m wide, 28 m high, has a deadweight of 12,700 tonnes, and can sail at 20.3 knots per hour.
Uljanik also delivered another ship to an Italian client, the Grande Spagna tanker for the Atlantica s.p.a. di Navigazione company, which is part of Grimaldi.

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