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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%

  

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: 075 - (28/07/03)

An integrationist past
The Croats are situated in a vulnerable location, on the threshold of the Balkans, yet betwixt central and eastern Europe. They have consequently had to accommodate themselves to a whole series of more powerful peoples for a while, often lasting centuries. This can help explain their eagerness to surrender sovereignty today.
After migrating from Ukraine and settling in modern Croatia in the sixth century, the Croats enjoyed a period of self-rule. But the incursion of Magyars in the ninth century in central Europe changed everything. In 1091 the Croats agreed to submit themselves to Hungarian authority under the Pacta Conventa. By the mid-1400s fear of Ottoman encroachment led the Croatian Assembly to invite the Hapsburgs, under Archduke Ferdinand, in to assume control and responsibility for Croatia. For centuries the frontier of Christendom against the tide of ottoman invasion in 1868 Croatia regained domestic autonomy, but significantly under Hungarian authority.
It became absorbed into Yugoslavia after the First World War, but broke away in the Second World War under the Ustase who collaborated with Germans, the most discreditable episode in Croatian history. But the Partisan leader himself was a Croat, Marshall Tito, who proceeded to found the Federal Socialist Republic of Yugoslavia after the war. Croatia became a relatively successful part of the federation, the one communist polity that allowed its citizens to leave freely and could thus be justly called a socialist country, rather than a socialist prison.

Independence at last
In 1990 Croatia held its first multi-party elections, in which former Partisan general and long-time nationalist Franjo Tudjmann was elected president. Independence was declared next year, which triggered off a brutal four-year war with Belgrade. In December 1995 Croatia signed the Dayton Accord and agreed to the return of all refugees.
The death of Tudjman in December 1999 may now be seen to be a blessing, allowing Croatia to enter the new decade, century and millennium with a clean slate. A new president and coalition government, under a new premier, have been able to pursue national reconciliation, democratisation, regional cooperation and refugee returns.

The economy slowly turns around
The government of Premier Ivica Racan has a huge task on its plate. Reform was stalled throughout the 1990s bar some very shady privatisation deals. Unemployment climbed to 22% officially, but was almost certainly over 30% for a while, as the new employers divested themselves of surplus labour.
Some progress has been made subsequently. GDP grew by 2.9% in 2000, by 3.8% in 2001, by 5.2% in 2002 and by a prospective 5.2% in 2003. Inflation, after being in high double figures for most of the 1990s, is now running at 2.3%. Unemployment is down to 14.8%, at least officially.

EU and NATO membership is the answer
The government, like so many regimes in Croatian history, sees the salvation of the country in an integration into larger structures outside. The two most important are of course the EU and NATO. Croatia formally requested to join the EU on February 25th, despite being warned by various Brussels officials that its bid was too early. It is now agreed on all sides that entry into the EU is realistic after all for 2007.
Croatia was cold-shouldered from being even a Partner for Peace of NATO in the 1990s with Tudjman in charge and Croatian war criminals at large. Many of these have now been handed over with the full cooperation of the government with the Hague authorities. NATO entry within a few years is on the cards. Croatia is at last coming in from the cold.

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AGRICULTURE

Croatian government earmarks funds to alleviate consequences of drought


The state will alleviate the consequences of a long period of drought with 400 million kuna and the funds will be secured through the re-allocation in the state budget, the Croatian government decided on 3rd July, HINA News Agency has reported. 
Only about 20 million kuna are envisaged in this year's budget for the cushioning of natural disasters. Prime Minister Ivica Racan warned that more money would have to be earmarked for extraordinary and crisis situations in the future.
A total of 15 counties were declared natural disaster areas due to drought and damage from drought is estimated to 1.8 billion kuna.
More accurate data on the damage will be available in mid-August, by when all counties are expected to submit final damage estimates.
Public Works Minister Radimir Cacic said the state was actually paying the total wheat production price with the 400 million kuna - the total production of 800,000 tonnes times 0.5 kuna per kilogram amounts to 400 million kuna.

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ENERGY

Ukrainian premier urges Croatia to speed up oil pipeline project

Ukrainian Prime Minister, Viktor Yanukovych, has called on Croatia to speed up the implementation of the Druzhba-Adria pipeline project to transport oil through Ukraine to the Croatian port of Omisalj on the Adriatic Sea, UNIAN News Agency has reported.
Yanukovych discussed the project at a meeting with Croatian Foreign Minister Tonino Picula in Kiev, Yanukovych's press secretary, Taras Avraukhov, told journalists after the meeting. Yanukovych "emphasized that it was necessary to implement the Druzhba-Adria project as soon as possible," Avraukhov said. According to him, Picula said at the meeting that the Croatian government "fully supports" the project but the environmental component still remains unclear.
Croatia is close to the completion of the project technically but there is an ongoing discussion in its society about the environmental safety of the project. It could threaten the development of tourism in Croatia, which constitutes a significant part of GDP, Picula said.
According to Picula, a large part of the work has already been done and oil terminals in Omisalj are ready to receive oil. "We do not have any doubt that the project is profitable and economically sound," Picula said.
He emphasized that "a serious discussion is being held in Croatia on whether the project is environmentally appropriate".
Picula also said that his country wanted to avoid any environmental accidents which are possible during the implementation of the Druzhba-Adria project.
Answering the question about a specific date when the project will begin, Picula said that this was not a problem and the pipeline could begin its work as soon as all technical issues were solved.
UNIAN reported earlier that the Ukrainian Cabinet of Ministers had submitted an international agreement on oil transit under the Druzhba-Adria project to parliament for ratification. It envisages additional transit of 5m t of oil through Ukrainian territory. The intergovernmental cooperation agreement on the project to link the Druzhba and Adria pipelines was signed in Zagreb on 16th December 2002.

World Bank, Croatian government complete energy negotiations

Representatives of the Croatian government and the World Bank have successfully wrapped up negotiations on the Energy Efficiency Project, which is to be financed by the World Bank with a loan worth 4.4m euros and a US$7m donation, the World Bank said in a statement on 7th July, HINA News Agency has reported. 
The project is aimed at assisting the government's efforts to ensure efficient, environmentally-sustainable energy supply, with realistic and affordable prices.
Since Croatia's admission to the World Bank in 1993, this international financial institution has financed 21 projects in the country, which are valued at slightly more than US$1bn, of which 700m was paid..

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FOREIGN LOANS 

Croatia, German bank sign 70m Euro loan for Croatian Railways

Croatia's Finance Ministry and Germany's state-owned bank Kreditanstalt fuer Wiederaufbau (KfW) signed a 70m-euro loan agreement on 1st July which Croatian Railways will use to renovate and modernise its infrastructure, HINA News Agency has reported. 
Finance Minister, Mato Crkvenac, who signed the agreement, said it was only part of a 180m euro loan that was being negotiated.
Interest is EURIBOR plus 1.3 per cent, or 3.4 per cent at present, which are very favourable conditions that infrastructure projects need, he said.
The other signatory of the agreement, Peter Klaus, one of the KfW executive directors, said KfW had invested 613m euros in a variety of projects in Croatia, starting in 1992, when the bank had loan-financed the purchase of five Lufthansa aircraft for Croatia Airlines.
The bank views investing in industry and infrastructure important for Croatia and is interested in further cooperation in similar projects, Klaus said.

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SHIPPING

Croatian premier expects Ploce Port deal to be ratified in two months' time

Croatia's Prime Minister Ivica Racan said on 14th July that an agreement with Bosnia-Herzegovina on the seaport of Ploce could be ratified in two months' time, and announced that in the coming three to four weeks Zagreb would offer to Sarajevo a model and programme for the construction of sections of the pan-European 5C road corridor, HINA News Agency has reported. 
After talks with a delegation of the Bosnian Council of Ministers, led by Premier Adnan Terzic, in Sarajevo, Croatia's PM told reporters that the two sides assessed that the problem of the southern Croatian port of Ploce should finally be taken off the agenda.
"I am here taking on the obligation to see the agreement (on the issue) be ratified by the Croatian parliament," Racan said, adding that this should happen within two months. In addition to the ratification of the said agreement, a protocol should be adopted which envisages the elimination of an international arbiter from the future managing council of Ploce Port.
The protocol would stipulate the possibility of ad hoc arbitration in cases of dispute, but the Croatian PM believes that the two countries are capable of solving problems of that kind on their own. 

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TRANSPORT

Section of Zagreb-Split highway opens in Croatia

The 82-km-long newly-built section of the Zagreb-Split highway from Udbina via Gornja Ploca to Zadar was opened for traffic on 30th June. The construction of this part of the highway cost 2.2bn kuna (approx. 93m Euros), HINA News Agency has reported. 
Officially opening the section, Croatian Prime Minister Ivica Racan recalled that criticism about and mistrust in the possibility of building this highway had been expressed but also that the entire project of a highway towards the Croatian south had been dreamed of for decades. "We succeeded in accomplishing this goal when Croatia's political, economic and financial rating is improved," Prime Minister Racan said
Racan announced that this year 150 km of highways would be opened for traffic, while in 2004 this number should amount to 190 km. Croatia, he said, is building a road network in order to benefit from its geo-strategic position, integrate itself in Europe, and ensure a better standard for its citizens. 

Croatia, World Bank sign agreement on loan for Rijeka Gateway project

The Croatian government and the World Bank signed a guarantee agreement for a construction project known as the Rijeka Gateway Project in the northern Adriatic city on 12th July. The World Bank is participating with a US$155m loan, HINA News Agency has reported. 
The agreement was signed by Finance Minister, Mato Crkvenac, and the director of the bank's Regional Office for Central and Eastern Europe, Andrew N. Vorkink.
The loan agreement was also signed by representatives of three companies for which the loan was intended - the Rijeka Port Administration (which will receive US$54.6m), Croatian Highways (US$17.1m) and Croatian Roads (US$83.3m).
The signing ceremony was attended by Prime Minister Ivica Racan, his deputy, Slavko Linic, Minister of Maritime Affairs, Transport and Communications Roland Zuvanic, and Minister without Portfolio Gordana Sobol.
Racan said that the government had concentrated its efforts on improving the infrastructure because such projects would "take the country and its people to a better future." "Not only will they make it possible for Croatia to formally join the EU, but will also enable it to reach the level of development of EU member countries," he said, adding that they also stimulated other important development projects.
The prime minister said that it was Croatia's duty to respect its geopolitical position and connect parts of Europe once it is fully integrated. He appealed to all those involved in the implementation of the project to respect the law and obtain all the necessary permits for the job.
Vorkink said that the World Bank would not be investing US$155m unless it was convinced that the project would be successfully implemented. He added that the port of Rijeka was expected to increase its competitiveness and the flow of cargo and passenger transport in the next decade.
The loan will finance the construction of new port terminals, a passenger port, commercial, tourist and nautical facilities, and connecting roads to the container terminal.
The project, worth US$264m, of which 320m kunas (US$48.5m) will be secured from the national budget, is expected to be completed by 2009. The World Bank has granted the loan for 15 years with a five-year grace period.

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