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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: 072 - (17/04/03)

EU and NATO beckon
The government of Premier Ivica Racan has made Croatian membership of the EU its number one priority. This is not so much because it expects great immediate benefits from it, but that it would confer legitimacy on the policy it has been pursuing with difficulty and much popular disapproval. It needs the blessing of the West to convince the population that its way is veritably the only way for Croatia.
NATO membership is another 'must' for Croatia. A key development here, and indeed in EU negotiations was a visit to Zagreb by Lord George Robertson, Secretary-General of NATO, which is based in Brussels and naturally is a regular interlocutor of the Brussels commission in the Berlaymont.
"Croatia's prospects of entering NATO are very good if it persists with reforms, and other potential candidates will not slow it down on that road." Robertson, said in Zagreb. Upon completion of his meeting with Vice President of the Croatian parliament and Chairman of its Foreign Affairs committee, Zdravko Tomac, Robertson noted that Croatia's prospects were very good if "you keep up with challenges."
Robertson dismissed the possibility of Croatia becoming "hostage" to its neighbours, as suggested by Anto Djapic of the Croatian Party of Rights. As for 2006 as the year by which Croatia might be ready for full NATO membership, its secretary general said it was an interesting date but clarified that he could not yet specify the timetable.
Stating that Croatia had made "impressive" progress over the past year, Robertson pointed to the need of resuming reforms and meeting international commitments, including cooperation with the UN war crimes tribunal at The Hague. As key requirements, Robertson mentioned the reform of the judiciary, combating crime and corruption, security of data secrecy, the reform of the armed forces and refugee returns. Robertson stressed the need for regional cooperation, saying Croatia's role in it was crucial. He commented on the assistance given Bosnia and Herzegovina and the settlement of the Prevlaka peninsula border issue with Serbia and Montenegro. "NATO will follow these developments and will share experiences to help," he said.

Economy recovers
The Croatian economy is bucking the trend in the EU and is growing at a healthy pace. GDP rose by 5.2% in 2002. This achievement was based upon a 6.6% growth in consumer spending and a 10.1% increase in gross investments. The trade sector rose by 12.7% and construction by 13.9%.
These figures could be questioned as somewhat exaggerated. Indeed they probably are. But the feel of local economists is that Croatia is doing better than before. The wide-ranging reforms of the Racan years from the beginning of 2000 are bearing fruit. Coupled with EU and NATO membership, the outlook is positive, despite massive unemployment of over 20% (more like 30%, say the unions) and much hardship among the poor.

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AVIATION

Istrian prefect says cargo aircraft project with Israel important

Istria County Prefect, Ivan Jakovcic, told a news conference in Pula on 27th March that the implementation of a project to build a plant for transforming passenger aircraft into transport aircraft, with an Israeli partner, was of strategic interest for the Istria County, HINA News Agency has reported. 
The project is important not only in terms of reducing unemployment, but also in terms of "conquering high technology and connecting existing Istrian companies with renowned ones," he said.
Commenting on the statement by the president of the Pula branch of the Social Democratic Party (SDP), Livio Bolkovic, that it was dangerous to bring the Israeli military industry to Pula and that the Israeli investment was in fact aimed at building weapons factories and military aircraft, Jakovcic said that those were false claims which were misleading the public.
"This is an exclusively civilian project of constructing a plant for the transformation of passenger aircraft into cargo aeroplanes, which envisages the creation of several hundreds of new jobs and investments of around 30m euros," said Jakovcic.
He added that the project was endorsed by President Stipe Mesic and Vice-Premier Slavko Linic.

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ENERGY

Croatian, Bosnian power industries sign cooperation agreement

The CEO of the Croatian Power Supply Company (HEP), Ivo Covic, and the director general of the Bosnian Power Supply Company (EPBiH), Enver Kreso, signed a cooperation agreement in Sarajevo on 1st April, HINA News Agency has reported. The agreement stipulates the purchase of 5.22bn kilowatt-hours of electrical power produced in Bosnia, estimated at 150m euros. 
The two companies' officials also signed a protocol on business and technical cooperation along with some other protocols and agreements.
Due to a lack of its own primary energy sources, Croatia chose to invest into the construction of power supply facilities in other republics of the then Yugoslavia in the 1970s, especially those using coal. HEP financed the building of thermoelectric power plants in Kakanj and Tuzla in Bosnia.
Based on these investments, Croatia was to gain the right to power supply for 20-25 years, but the business arrangement was truncated due to the war.
The Croatian company is expected to sign an agreement with the Bosnian Serb power supply industry, which is currently managing the thermoelectric power plant in Gacko.

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FINANCIAL NEWS

Croatian deputy premier says 18bn kuna to be invested in public companies

A score of public companies are this year planning to invest a total of 18bn kuna (2.33bn euros), of which 85 per cent could be realized by domestic producers and concessionaires, Croatian Vice-Premier Slavko Linic said on 31st March, HINA News Agency has reported.
In the past three years the government managed to consolidate public companies, secure their profitable work and strengthen their investment activity, said Linic.
According to available data, some 20 public companies have in the last three years increased profits by about 5.5bn kuna - from 43.3bn in 2000 to 48.7bn in 2002 - while expenses grew more slowly, from 44.3bn in 2000 to 45.2bn kuna in 2003.
While companies wrapped up the year 2000 with about a billion kuna higher loss than profit, the 2002 year ended with profits of 3.4bn kuna after covering losses. The overall gross earnings of the companies in 2002 amounted to 3.8bn kuna, while overall loss totalled 388m kuna.
The highest gross income last year was made by the Croatian Telecom (HT) with 2.3bn kuna, INA oil company with 854m kuna and Plinacro with 181m kuna.
Croatian Railways (HZ) marked the highest loss of 227m kuna because of indebtedness for investments into infrastructure, said Linic.
The official said that with the government's direct influence through ministers in supervisory committees of public companies, they had managed to consolidate. He dismissed the possibility of ministers continuing to be members of supervisory committees pursuant to a bill on preventing a conflict of interest, which is being prepared.
Linic said that notwithstanding the continuation of the crisis in Europe and the world and events in Iraq, the planned growth of Croatia's GDP to 4.2 per cent this year was realistic. According to statistical data, economic growth last year was 5.2 per cent.

Croatia's GDP higher by 5.2 per cent in 2002

Croatia marked a record high rate in the economic growth in 2002 in comparison to several previous years, and the Gross Domestic Product really climbed by 5.2 per cent last year as against 2001, HINA News Agency has reported. 
According to a report released on the website of the Central Bureau of Statistics, the increase in GDP was based on the expansion in domestic demand, i.e. a 6.6 per cent rise in consumer spending and a strong growth of 10.1 per cent in gross investments.
As regards activities with the highest growth rate, 12.7 per cent was registered in the trade sector and 13.9 per cent increase in construction. The industry saw a real rise of four per cent in 2002 from 2001.

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FOREIGN ECONOMIC RELATIONS

Macedonian, Croatian businessmen discuss "excellent" economic cooperation

The trade exchange between Macedonia and Croatia in 2002 amounted to US$114m, which is 3.7 per cent of the overall exchange with other countries, MIA News Agency has reported. 
Speaking of the "excellent cooperation" between Macedonia and Croatia so far, the businessmen agreed that similar meetings would significantly enhance the economic relations between the two countries, especially as the possibilities for development of bilateral trade were much better at this moment than in the past. 
Chairman of the Regional Chamber of Commerce from Rijeka, Josip Stankovic, said that Croatia has lost around US$30bn because of the military conflict in the country and even more by losing its partners from the eastern countries. 
Croatian businessmen are especially interested in Macedonian wine and early grown vegetables. The trade of agricultural and food products has been facilitated this year with the changes to the Free Trade Agreement signed between the two countries. 
According to the Macedonian Economic Chamber, the country has gained US$59m from last year's export to Croatia, which has risen by 1.1 per cent in comparison with 2001. Imports amounted to US$54.9m, rising by 18.4 per cent in comparison with 2001. 
The main Macedonian products exported to Croatia are the products from the ferrous metallurgy, agricultural and food products, textile and electrical conductors. The import is mainly focused on agricultural products, medicines, appliances, detergents, glass, etc.

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FOREIGN INVESTMENT

A total of US$980.5m invested in Croatia last year - central bank

Direct investments in Croatia totalled US$980.5m last year, while foreigners invested a total of US$7.47bn from 1993 to the end of 2002, according to figures which the Croatian National Bank (HNB) released on its web site, HINA News Agency has reported. 
Last year foreign investments fell below one billion dollars for the first time after three years. The year with the highest investment was 2001 with US$1.5bn.
In 2002, Austrian companies accounted for the largest part (44.13 per cent) of all the investments. They were followed by Italians (19.92 per cent), and Luxembourg (12.91 per cent). The fourth was the European Bank for Reconstruction and Development (EBRD) covering a 9.56 per cent share.
Of all the investments, 63.75 per cent was directed into the banking sector last year. The share of investments into the tourist sectors (i.e. hotels and restaurants) was 9.62 per cent, and 3.47 per cent went into the trade.
According to the HNB, in 2002 Croatian companies invested US$96.67m abroad, while their investment in the period from 1993 to the end of 2002 amounted to US$668.2m.

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