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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: 071 - (27/03/03)

The Coats are doing fairly well, all things considered. This is despite a spluttering European economy and fewer tourists, a mainstay of its balance of payments, whose deficit is, indeed, worsening, going from 3.2% of GDP in 2001 and 6% in 2002. But it is expected to decline to 4.7% of GDP in 2003.

Growth continues
The good thing is that GDP itself is growing, rising by 4.7% in 2002 and by about 3.4% in 2003. A rise in investments and consumption last year should generate enough momentum for further growth this year and next.
This is good news for the government of premier Ivica Racan, which has been understandably unpopular. It has been three years of hard slog since it took over at the beginning of 2000. The plaudits have come from the West. EU entry is now on the cards, even if some officials in Brussels are cautious. Croatia is manifestly European, indeed the land of birth for several of the great Roman emperors, such as Diocletian and Constantine, and with a long Roman Catholic heritage.

The French route to the EU
President Stipe Mesic secured French support in a meeting with President Jacques Chirac in Paris. He gave a lecture to the French Institute for International Relations (IFRI), in which he expressed that Croatia is "willing, ready and able" to do what is required of it by the EU.
He pointed to the full cooperation with the Hague-based UN war crimes tribunal, reform and de-politicisation of the judiciary, minorities' rights and refugee returns, and in this context he added that there were some cases of misunderstanding between the Croatian government and the EU.
"I believe that the time of misunderstanding is over," Mesic said, adding, "We do know very well what is expected of us… and not only do we know, but we are also willing, ready and able to carry it out."
The Croatian president stressed, "With its admission into the Union, Croatia offers an opportunity for the south-east of Europe to transform itself into a zone of peace and stability with respect to its policy of regional cooperation and good neighbourly relations." 
Concerning human and minorities' rights, Croatia, as a EU member, could help inaugurate "a new view on minorities in our part of Europe," Mesic said.

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ENERGY

Russia, Croatia sign agreement on Druzhba-Adria oil pipeline


Moscow and Zagreb have signed a set of cooperation documents related to the Druzhba-Adria oil pipeline, Interfax News Agency quoted Russian President, Vladimir Putin, as saying. His Croatian counterpart, Stjepan Mesic, in Moscow confirmed that the documents had been signed, adding that he hopes "negotiations on the gas pipeline will also come to a close soon." 
The 3,000km Druzhba-Adria oil pipeline will carry Russian oil to the Mediterranean market via the Croatian port of Omisalj on the coast of the Adriatic Sea. This route gives Russian oil an access route to the world market that bypasses the Bosphorus and Dardanelle Straits. The oil pipeline's capacity will be gradually increased. A single transportation fee of US$0.64 will be charged per tonne of oil per 100km. Oil majors YUKOS and TNK have already guaranteed oil deliveries of 2.5m tonnes each.

Croatia signs letter of consent for Southeast European regional power market

Croatian Foreign Minister, Tonino Picula, in Brussels on 25th January signed a letter of consent on the regional power supply market in Southeast Europe, HINA News Agency has reported. 
The document has been harmonized under the auspices of the Stability Pact and is aimed at establishing a regional power supply market in Southeast Europe and its integration with the EU market.
The document was signed in the Croatian mission to the EU in Brussels in the presence of European Commission and Stability Pact representatives.
The power industry ministers from nine Southeast European countries agreed in Athens last November on the establishment of a regional power supply market and its integration with the EU market. The letter of consent was then signed by Albania, Bosnia-Herzegovina, Bulgaria, Greece, Yugoslavia, Macedonia, Romania and Turkey, while Croatia announced it would signed the letter later.
At its session held on 20th February the Croatian government decided to sign the letter of consent.
"After analysing what Croatia's interests are, as a country which at this moment is adjusting its power system, and how this would influence the liberalization of the domestic power supply system, we decided to join the project," Picula said after the signing.
"This signature also has a political meaning, namely that Croatia shows that it sees a chance for its own economic promotion in its region which clears last doubt that by submitting its application for EU membership, Zagreb wanted to separate from its Southeast European neighbours," Picula said.
The signatories to the letter of consent are obliged to open their national power supply markets by 2005.

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FOOD & DRINK

Agrokor signs 11m Euro contract with Frikom

Croatia's Agrokor signed a contract to acquire a 55% stake in the Serbian frozen food and ice cream producer Frikom for €11m, seeurope.net reported recently. The buyer will invest US$17.5m during the next 12 months with the additional amount of US$500,000 for local infrastructure development. 
The new owner is also contractually obligated to keep all 836 Frikom employees until 2007. Announcing the above, Economy and Privatisation Minister, Alexander Vlahovic, explained that by purchasing the majority stake of Frikom, Agrokor had fully underwritten €12m of Frikom's financial obligations.

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FOREIGN ECONOMIC RELATIONS

Croatia, Spain form Joint Business Committee

The general director of the Senior Council of the Spanish Chamber of Commerce, Fernando Gomez Avilis, and the president of the Croatian Chamber of Commerce, Nadan Vidosevic, on 27th February signed a protocol on cooperation and the establishment of a Joint Business Committee with an aim to advance the two countries business Cooperation, HINA News Agency has reported.
Present at the signing was Croatian Vice Premier, Goran Granic, who said that Croatia's long-term goal was to be open, competitive and to have a stable country.

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INFORMATION TECHNOLOGY

IBM Croatia becomes gold partner of Cisco Systems

IBM Croatia is the first gold partner of Cisco Systems in Croatia, enabling it to provide the highest level of computer support to its users, according to a joint statement made by the companies' representatives, reports New Europe. 
IBM Croatia's global services manager, Igor Dropulic, stressed that IBM was the largest world integrator of software solutions and technologies with more than 200,000 experienced electronic business consultants around the globe. He added that IBM Croatia had 12 network specialists for Cisco technologies, out of which only two were foreigners. In 2002, IBM Croatia was the first in Europe, the Middle East and Africa to achieve the highest user satisfaction index of 4.8 according to the Cisco methodology, on a scale to five.

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MINERALS & METALS

Russian company will walk away if not allowed to run Croatian ironworks

The mediator in the sale of Sisak's ironworks to Mechel said on 1st March that the owners of this Russian company had agreed in principle to alter a bank guarantee as requested by the Croatian government, which should help restart production, HINA News Agency has reported. 
The changes are minor ones and Mechel will make them so that the government's March 6th session may pass decisions which will bring the sales contract into force and enable Mechel to work in the ironworks, said Edin Todorovac.
He added that if there were further obstructions even after those demands were met, Mechel would withdraw from the venture and leave the ironworks as it cannot allow its reputation to be smeared this way.
Todorovac said it should not be in anybody's interest to undermine the sale, as it would damage the ironworks, its 1,700 workers and Croatian society. He recalled the sales contract was signed on 6th February and became effective that day but the two sides had yet to finalise it. On 27th February Mechel proposed a €3.6m bank guarantee for the payment of six minimum salaries, he said, stressing the guarantee was in order.
Todorovac said he told Nasibullu Mukhatdinov, the director of Mechel's Croatian subsidiary, Conares Balkan, that the contract had not been closed and that there were no legal grounds to start production.
According to Todorovac, Mukhatdinov consulted with Mechel's owners and decided not to heat the furnace, and was in charge to meet workers, guests and journalists to tell them the furnace was technically ready but would not be turned on until all legal issues were resolved.
Todorovac said it was unnecessary to issue a written ban on Mechel's entry into the ironworks as it had decided against turning the furnace on, and that the bankruptcy administrator, who handed the ban, knew of Mechel's decision.
Mechel is being unnecessarily smeared with accusations that it is in the ironworks illegally and has not fulfilled its obligations, said Todorovac. The Russian partner cannot be accused of failing to meet its commitments while negotiations are still under way, he said.
Mechel is not and cannot be blamed because the January salaries have not been paid, said Todorovac, recalling that the government undertook this obligation and must fulfil it.
The company's owners have said that if they cannot work in the ironworks, they will not have to be kicked out but will leave of their own, Todorovac said.

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TOURISM

Croat tourism inflow back on track

Croatia's tourism sector has every right to be optimistic regarding its future performance, based on last year's results, reports New Europe. In 2002, Croatia registered 8.3m tourists, up from 7.8m a year earlier. This is very close to the 8.4m tourists Croatia used to have in the 1990s, just before the war for independence from the former Yugoslavia. 
In 2002, the number of overnight stays reached 44.6m, up 1.2m, but still below the 1990' level of 52.3m overnight stays. Most tourists came from Germany, followed by Italy, Slovenia, Czech Republic and Austria. The most attractive destination for tourists was the northern peninsula of Istria, followed by the northern seaside resort of Opatija.

Croatian hotel inks deal with StarWood chain

Opera and Panorama hotels in Zagreb will sign a contract with the StarWood hotel chain on March 5th, by which they will join the international worldwide hotel chain managing 800 hotels all over the world. 
The Hotel Opera terminated a similar contract with Intercontinental several years ago because of financial reasons. It will join one of the highest categories of StarWood under the name Westin, while Panorama will enter another category - four points by Sheraton.

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TRANSPORT

World Bank mission backs Croatian Railways request for extension of loan

Members of a World Bank mission supported a proposal by the Croatian Railways (HZ) management that a World Bank loan to support restructuring programmes and upgrading in HZ be extended for another year, HINA News Agency has reported. 
The loan contract concluded in 1999 for a total value of 85m euros provided that the loan be utilised by 30th June 2003.
As was agreed during talks between World Bank representatives and HZ, HZ is supposed, before the end of March, to explain to the World Bank administration in Washington just why the loan has not been realized for the projects proposed or rather, just how it is planning to realize the use of the loan in the requested prolongation and just what the loan means to HZ.
A three-member World Bank mission visited Croatia between 24th-28th February with the aim of evaluating the situation and the results of the loans application. As reported by HZ, a final meeting was held on 28th February with the mission and the HZ company's management to discuss analyses that resulted from the mission's visit to Zagreb.
The HZ management hopes that the World Bank will accept the reason for the extension of the loan.
However, regardless of the decision, HZ will continue its restructuring and upgrading plans because that is the only way to create an efficient railway company that will be able to operate according to market principles, the president of the HZ managing board, Marijan Drempetic, said at the end of the meeting.
To date, modernization has been applied to the railway infrastructure, reconstruction of locomotives and wagons, redundancy payments and other minor projects costing a total of 50m euros.
The World Bank mission, HZ reported, assessed that the results they saw were very good and that the aims of HZ's restructuring and modernization programmes were being achieved. Some components of the programmes have been surpassed.

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