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  CROATIA

REPUBLICAN REFERENCE

Area (sq.km)
56,400

Population
4,334,142

Capital
Zagreb

Currency
Kuna

President
Stipe Mesic

Private sector
% of GDP

55%

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Background:
In 1918, the Croats, Serbs, and Slovenes formed a kingdom known after 1929 as Yugoslavia. Following World War II, Yugoslavia became an independent communist state under the strong hand of Marshal TITO. Although Croatia declared its independence from Yugoslavia in 1991, it took four years of sporadic, but often bitter, fighting before occupying Serb armies were mostly cleared from Croatian lands. Under UN supervision the last Serb-held enclave in eastern Slavonia was returned to Croatia in 1998. 

Update No: 065 - (26/09/02)

The Croats are pleased in general to have a different dispensation, under a new president and government. The old president, Franjo Tudjman, a populist strongman on the lines of Milosevic, died in December 1999, allowing a new broom for a new century.

New team shapes up
President Stipe Mesic and Premier Ivana Racan have had to learn on the job and through trying times. They are both indefatigable workers, which they need to be.
The economy is in no great shape and is not being helped by the general EU slowdown. Unemployment, officially 22%, is more likely over 30%, with no great social security system to pay for the dole. The tolerance of the public for this state of affairs is not hard to fathom, however. Everybody knows that it would be futile to try and turn the clock back.

Turn to Europe the key 
The previous Tudjman regime was anti-EU and Croatia was largely shunned in those days by the international financial institutions and foreign investors. Now Croatians cannot wait to join the EU and be accepted as Europeans. With traditional ties with Germany, which was the first state to recognise its independence, and the huge heritage of having been a part of the Austro-Hungarian empire, the Catholic Croats feel more part of Europe than the Serbs. Indeed they see themselves as akin to Slovenes, a northern not a southern, Balkan people. But Slovenia is far more prosperous and successful.
With a long way to go to catch up, the Croats have their plusses, an excellent location as a gateway to the Balkans, a beautiful coastline dotted with islands and a splendid array of architecture in its old towns and villages. Croatia is a natural to develop a successful tourist industry after the current world-wide depression in travel abates. The EBRD is assisting air traffic control with a US$25m loan, while the European Investment Bank (EIB) is also involved in a US$55m programme of which the EBRD loan is a part. The loans will help Croatia develop its role as the strategic hub of Central European and South-eastern Europe airspace.

Financial sector rewarded
The banking sector in Croatia was in poor shape under Tudjman. But there have been signs of improvement with the new regime.
The Banker has given an award to the Privredna Bank Zagreb (PZB) as the best Croatian bank of 2002. Its net profits soared by 43% in 2001 and its average yields were 24.3% on capital. The accolade is for its transparency and accountability as much as its financial results.

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ENERGY

First wind farm in Croatia likely to be built on island of Pag


The Croatian island of Pag, famous for its cheese and lace, is likely to get yet another "landmark" by the end of this year, the first wind farm at the Adriatic, HINA News Agency has reported. 
At the end of 1988, a 30-metre-high experimental pillar was set on the island to measure the strength, speed and directions of winds.
At the height of 20 metres, it is measured that the annual average speed of winds comes to 6.4 metres per second. Thus the wind farm, according to estimates, could annually generate 12.36 GWh of the power. The investment would be worth about 42m kuna (approximately 5.75m euros).
The plans for the first wind farm have been made by the Croatian-German company Adrija Wind Power. What is important for consumers is the fact that the purchase price of the electricity provided from the wind farm will be cheaper by 10 per cent than the current price of the electricity.
It remains to be seen whether Pag will be the site of the 99th wind farm in the world.

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FOREIGN LOANS

World Bank OKs US$25m for property registration programme

The World Bank office in Zagreb has issued a press release stating that the bank has approved a US$25.7m loan to Croatia for a property registration programme. It said the programme will help establish an efficient land administration system aimed at contributing to the development of efficient real property marekts.
"The project aims to establish systems that will speed-up registration of property rights, especially of sales and mortgages and to put in place a process to clarify land ownership across Croatia," Andrew Vokink, the bank's director for southeastern Europe stated, quoted by dpa.

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RETAIL INDUSTRY

Lesnina opens Croatia's largest furniture store, creates 300 jobs

Furniture factory, Lesnina, recently opened Croatia's largest furniture store, with a sales centre space totalling 33,000 square metres. The store is located near Sesvete. The Merkur chain is also located within the sales centre complex.
According to Dubravko Skrlina, Lesnina director for Croatia, the store was packed full of customers right from the grand opening. With 300 new jobs as a result, Bluebull reported that the salon marks one of the largest investments in Zagreb this year. There are plans to open a sales centre in Split by the middle of 2003, the third in Croatia after Osijek and Zagreb. The Merkur sales centre, with a total surface area of 6,000 square metres, offers more than 25,000 products. Merkur plans to open a location in Rijeka this November and one in Zadar next year.

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SHIPPING

Croatia minister hopeful shipyards can be saved


Croatian Economy Minister, Ljubo Jurcic, on 9th September expressed the view that government measures relating to shipbuilding would cost the government about 2.96 billion kunas (400 million euros) over the next five years, of which almost 2.6 billion (351.3 million euros) relate to the Brodosplit and 3 Maj shipyards, HINA News Agency has reported.
The government discussed the situation in shipbuilding companies such as Brodosplit, 3 Maj, Kraljevica, Pula's Uljanik and Brodotrogir on 22nd August. On that occasion the government took on 2.96 billion kunas (400 million euros) of their debts, of which 62 per cent or 236.4 million euros relates to Brodosplit, and 28 per cent or 108.5 million euros to the Rijeka-based 3 Maj.
Along with financial measures, the government adopted a series of organizational measures as well, defining a control mechanism to monitor the implementation of the adopted conclusions.
Jurcic based his high aspirations for the government's measures on the examples of Uljanik and Brodotrogir, which are operating successfully. He emphasized that simulations had shown that bankruptcy in failed shipyards would cost three times more than the measures adopted.
The measures also deal with the role of the state institution Croatia's Shipbuilding - Jadranbrod (HB Jadranbrod) which would be the key control mechanism on the part of the state as the majority owner.
Jurcic pointed to the significance of such a total control mechanism, which will require monthly reports on the implementation of the said measures.
The director of HB Jadranbrod, Nada Braovic, said that one of the reasons for the government measures was the significance of the domestic component in shipbuilding. That component represents 59.4 per cent of the sale price of ships, she said. Looking at the material involved, this consists of 60 per cent of the price of the ship, 30.1 per cent is domestic material and about 30.7 per cent is imported, she explained.
The intention, however, is to increase the domestic share, Braovic said, adding that about 250 domestic producers have shown interest.
A significant organizational measure is that management boards in shipbuilding yards will come up with a plan of restructuring and business rationalization which foresees a decrease of 20-30 per cent of the current employees and the costs of staffing. This will involve changes to collective agreements and if an agreement is not reached before the end of the year, the government has decided to resolutely withdraw all the above measures, Braovic pointed out.
The measures also foresee separating activities and property that are not in the main line of business, and a feasibility study of a merger between 3 Maj and Kraljevica, as well as Brodotrogir and Brodosplit.
Other measures will include preparations to privatize Uljanik next year with the sale of shares to employees and board members.

Brodosplit starts major tanker construction project

Croatia's Brodosplit shipyard will commence tanker construction for the JSC Primorsky shipping company at the beginning of September. 
The new tanker of "aframaks" type of ice-class is named Sakhalin. The construction agreement was signed in December 2000, and foresees construction of the third tanker in the event of successful construction of the first two tankers which will be used for oil transport from the Sakhalin shelf, Skrin reported. 

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TRANSPORT

Americans, Turks join forces to link Croatia to its coast

Looking both east and west to tap a potentially lucrative tourist industry that could fuel its battling economy, Croatia is working hard to accelerate access to its undeveloped coastline in an ambitious multimillion dollar motorway. Currently, roads to coastal regions are narrow, small and wind through the challenging Klek mountains, New Europe has reported.
A joint venture of US contracting giant, Bechtel Group Inc. and Turkey's Enka Construction & Industry Co.Inc. is fast building the road's biggest portion - a US$990m, 189 km toll road that, upon completion, will enable travellers to drive from the capital, Zagreb, to the coastal city of Split, and further down the Dalmatian coast to Dubrovnik. In its entirety, 34 pre-cast bridges will provide smooth driving around mountainous terrain and over spectacular, undeveloped valleys. Bechtel/Enka has spent nearly US$200m on heavy equipment needed to move 98.3m cubic metres of earth and fill and clear 946 acres of land. Loaded with geotechnical and logistical challenges, Chechtel Project Director, Jack Hume, says bring together some 2,400 Croatians, Turks and Americans into an efficient road building work force has been as much of a challenge as cutting the road. "This job has got just about everything," he noted. The job site, spanning a remote a largely undeveloped area, spotted with small villages connected by ageing, narrow lanes beginning at Bosiljevo, south of Zagreb, heading further south to Sveti Rok, is a key section in a trans-European road network that will connect Croatia to western Europe. Funding is provided by the US Export-Import Bank and administered by the Croatian Roads Authority, while three Croatian firms are responsible for the design.
Bechtel and Enka-Hume's Turkish counterpart is Ozger Inal share project management, along with local engineers integrated into the structure; Croatian subcontractors have also flocked to the development.

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