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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: 069 - (28/01/03)

The Croats are eager to join the EU, making 2003 the year for a full application. The last three years have been painful with unemployment stubbornly over 20% of the work force (more like 30% say the unions who should know) and living standards remaining low. But a new government under Premier Ivica Racan is making progress in reform, although quite likely not enough to win parliamentary elections this year.

EU hurdles
Clearly, Racan is convinced that if he could clinch EU membership it could help him at the polls. He took over in February 2000, the month after President Stipe Mesic was elected successor to Franjo Tudjman, who died in December 1999. Racan made his overriding priority to bring the country closer to EU membership by the end of his term. The Croats very much see themselves as Europeans, which indeed they indubitably are, very much so.
The removal of Tudjman was a very important step towards earning international respectability, since he was Croatia's equivalent of Milosevic. But there are still those at large who face indictment for their war crimes. This issue will not just go away; indeed the success in arraigning Milosevic before an international tribunal has whetted the appetite of investigators for more former Yugoslav war criminals. The head of the European Commission's mission to Croatia, Jacques Wunnenburger, warned Zagreb not to expect immediate acceptance of its bid. He said in November in the Croatian capital: "Although the government intends to apply for the full membership next year, our advice is that Croatia should be cautious, because the EU is not yet ready for new rounds of enlargement."
According to Wunnenburger, an indictment against ex-army chief of staff Janko Bobetko, who has been charged by the International Criminal Tribunal for the former Yugoslavia (ICTU), will play a significant role in Croatia's EU bid. For Zagreb has refused to extradite Bobetko to the ICTU, a decision that has faced strong criticism from the EU, indeed domestic sources as well. The country's authorities have been condemned by their own media, the Organisation for Security and Cooperation in Europe (OSCE) and the EU for failing to prosecute war crimes effectively. A number of Croat soldiers have been tried for war crimes committed against Serb soldiers in the early 1990s and been acquitted in trials that have been described as "controversial," as many of the witnesses have forgotten their earlier testimonies.
There is no doubt that the public is adamantly against handing over those charged with war crimes, such as Bobetko, since it is the Croat nation that is then on trial, they feel. This is, indeed, partly true. A chief-of-staff may give orders, but is acting on instructions from the political leadership, since deceased. Be that as it may, it is unlikely that Racan would surrender Bobetko ahead of elections; but, therefore, unlikely that the government will be able to play the EU card at the hustings as well.

Upbeat on the economy
The finance minister of Croatia, Mato Crkvenac, is bullish about the country's prospect in 2003, when he expects GDP growth of 5%, up from last years 4%. Employment and living standards should rise, as also foreign currency attracted something like US$4.5bn in FDI, a good deal of it in its tourist industry, which is becoming a rival to Spain, Portugal and Greece. 
The magnificent countryside and coastline (studded with beautiful islands), the fine medieval and baroque architecture and a friendly population make Croatia a logical location for EU and US tourists. The future looks rosy, even if there is still a long way to go before Croatia matches the living standards of the Iberians and the Greeks, all in the EU.

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EU ACCESSION 

Greece supports Croatia's EU membership 

Greek Foreign Minister and chairman of the EU Council of Ministers, George Papandreou, said in Zagreb on 14th January, Greece supported Croatia in its bids to join the European Union, HINA News Agency has reported. 
Addressing a joint news conference after talks with Prime Minister Ivica Racan, Papandreou said that Greece, both separately and as the EU's current chair, supported Croatia's membership of the Union.
He congratulated Croatia on the economic and political reforms it had undertaken, saying it served as a model to the other countries in the region. Croatia's success story may be an example to every country of the region, Papandreou said, adding it was up to each country to set its own pace of carrying out reforms and adapting to European values.
Asked by journalists about the possibility of Croatia's accession to the EU in 2007, the Greek official said it was very difficult to play with dates. He would not, however, rule out the possibility of Croatia catching up by that time.
Prime Minister Racan, stressing the good and amicable relations with Greece, voiced satisfaction with the fact the country was chairing the EU.
"We are glad Greece is chairing the EU ... because of its understanding of the situation in this part of Europe, and it is during Greece's chair that Croatia will apply for EU membership," he said.
He evaluated that both countries were interested in developments in Europe, especially in its southeast, and reiterated Croatia's wish to contribute to regional cooperation, in the interest of the region and Europe as a whole.
A Greek journalist asked about Serb refugee returns, an important obligation in Croatia's drawing closer to Europe. Racan said those returns represented "an important strategic step for Croatia."
"We are tapping the budget for a lot of money for refugee returns," Racan said, but added "the ethnic make-up cannot be like the one prior to the war and the aggression to Croatia."
Papandreou said Croatia had to resolve this issue in line with European standards. Refugee returns are of huge importance, not only in Croatia but in the other countries of the region as well, he said.
Papandreou invited Racan on behalf of Greek Prime Minister Costas Simitis, to visit Athens in the spring.
Earlier he met Croatian Foreign Minister Tonino Picula. He visited Zagreb as part of a tour of southeastern Europe's countries participating in the Stabilization and Association process with the EU. He also visited Macedonia and Albania.

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FINANCIAL NEWS

IMF official optimistic about Croatian economy

Croatia's economy indicators are favourable and if the country sticks to its own economic programme its prospects are good, an International Monetary Fund (IMF) official said in Washington on 9th January, HINA News Agency has reported. 
Speaking at a news conference, IMF executive director Johannes de Beaufort Wijnholds, who is in charge of Croatia, said he was quite optimistic regarding the future of Croatia's economy.
Croatia has a sound economic growth and low inflation, which is a good combination, said Wijnholds. There are no problems in the balance of payments, currency reserves amount to US$6bn, interest rates are very low, and most importantly, unemployment is declining, he added.
Wijnholds expects Croatia's economic growth this year could be 4-5 per cent, which he said was a satisfactory level when compared to the slowed down rate in Western Europe.
Wijnholds said Croatia still had problems with the state budget and structural adjustments but that this was being dealt with.
Commenting on claims that the country's foreign debt is high and growing fast, the IMF official said the important thing was to focus on making the debt manageable and stressed there was no reason to believe Croatia had a problem in this area.
The IMF has not voiced any concern about Croatia's indebtedness, said Wijnholds, but added it was important not to go too far with the foreign debt.
Croatia no longer needs IMF money and the stand-by deal is here only as a precaution because Croatia will not draw the funds, he said, adding this was a sign of strength.
Wijnholds cautioned, however, that Croatia must abide by the measures of reforms and saving which it adopted with IMF assistance.

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FOREIGN INVESTMENT

Croatian companies invested nearly US$100m abroad in 2002

Croatian companies invested US$96.48m abroad from January through September 2002 and a total of US$658.08m from 1993 through September 2002, according to central bank data released on 10th January, HINA News Agency has reported. 
Croatian companies' ownership investments abroad in last year's first nine months amounted to US$76.2m, or to US$588.49m from 1993 through September 2002.
Last year's first three quarters saw Croatian companies invest the most in Slovenia - 28.57 per cent of all direct investments. In that period 35.64 per cent of all direct ownership investments was invested in cellulose production, which leads to the conclusion that the majority was made by the Belisce paper and packing manufacturer, which purchased Slovenia's Valkarton in the first half of last year.
However, the majority of direct ownership investments in last year's first nine months was directed in the production of pharmaceuticals - 40.97 per cent. Cellulose production was second, followed by investments in maritime and coastal transport (14.97 per cent) and holding company management (5.06 per cent).
Besides Slovenia, Croatian companies invested in the Netherlands (24.7 per cent), Bosnia-Herzegovina (17.37 per cent), Switzerland (13.91 per cent) and Liberia (10.47 per cent).
Central bank data on foreign investments in the period between 1993 and the end of September last year indicates the main destination of Croatia's direct investments was Poland, which attracted 31.55 per cent of all investments. Some of Croatia's biggest companies, like the Pliva drugs company and the Podravka food manufacturer, have opened branches there or set up new companies.
Bosnia was next (26.58 per cent), followed by the Netherlands (11.5 per cent), Slovenia (11.45 per cent), Switzerland (4.1 per cent), the Marshall Islands (3.81 per cent), Macedonia (3.29 per cent), Austria (3.02 per cent), Antigua and Barbuda (3 per cent) and Panama (2.55 per cent).
Broken down by activity, the majority of ownership investments by Croatian companies between 1993 through September 2002 was made in pharmaceuticals (43.69 per cent) and maritime and coastal transport (13.11 per cent). Telecommunications were next with 6.69 per cent, monetary brokerage with 4.67 per cent and cellulose production with 4.61 per cent.

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PRIVATISATION

Report details progress made in Croatian privatisation

A total of 17.1 per cent of the state portfolio - 4.5 billion kuna - was privatised in the period between early 2000 and late 2002, read data from a report on state portfolio management and privatisation to be discussed by the government on 16th January, HINA News Agency has reported. 
Since the coalition government came into power at the start of 2000 up until late last year, 1,044 stock packages were privatised, the majority of which (1,013) were sold on the Zagreb and Varazdin stock markets.
Financial markets mostly sold stocks of companies in which the state owns less than 25 per cent.
Over the last three years 31 joint stock companies were privatised through public bids for tenders. The overall nominal value of these companies amounted to 1.1 billion kuna, while the buying price amounted to 506 million kuna.
A total of 28.5 per cent of the portfolio sold through public bids was purchased by foreigners and the rest by Croatian investors.

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