% of GDP
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.
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, 2003, 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.
The Croats are a people with a long past, that is profoundly marking their present and future. But of abiding significance is their mountainous and hilly geography, which has, moreover, changed, albeit slowly, during the centuries. In particular it underwent a long process of deforestation, which left many uplands bare.
They 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.
Yet their location gave them great opportunities as well, notably for sea-faring across the Adriatic and into the Mediterranean. But for this they needed timber to build boats. Hence the deforestation and the longer run tribulations of the countryside.
After peacefully 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. After various vicissitudes Croatia became largely free of Turkish rule by the 18th century. 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.
In 1990 Croatia held its first multi-party elections, in which long-time nationalist Franjo Tudjman was elected president. Independence was declared next year, which triggered off a 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 was 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, democratization, regional cooperation and refugee returns.
Update No: 078 - (27/10/03)
Upcoming elections in Croatia too close to call
Croatia will hold parliamentary elections on November 23rd, Prime Minister, Ivica Racan, told a recent press conference in Zagreb.
Racan, a Social Democrat, took over in January 2000 from the nationalist Croatian Democratic Union (HDZ), party of the late Croatian President, Franjo Tudjman, who died in December 1999. Racan's centre-left government has launched many reforms to the economy, judiciary, minority rights and prosecution of domestic war crimes.
In February this year, Racan submitted Croatia's application for membership of the European Union. Accession is Croatia's most important foreign policy objective and support is overwhelming.
Racan's governing Social Democrats and the HDZ will be main political opponents on the upcoming Croatian elections. HDZ and SDP are the strongest parties in Croatia, according to polls, but none has enough support to form a government without the help of their junior partners.
After the death of Tudjman, the head of the HDZ became conservative Ivo Sanader, a former deputy foreign minister under Tudjman who has been working to change the HDZ's nationalist image and create a modern conservative party. After he became HDZ boss, Sanader managed to reduce the influence on nationalists within the party. In an interview published by the daily Jutarnji list, Sanader said that he was confident HDZ would win the elections and come back to power.
Political analysts predict that the elections will be extremely close and the outcome for the governance of the country will depend on post-election coalitions.
Truth and reconciliation with Serbia
The Croats and Serbs killed each other by the hundreds of thousands in the course of the twentieth century, in the Balkan wars, in the early1910s, in the Second World War and in the early 1990s in the break-up of the former Yugoslavia, both across their common border and in Bosnia. The need for truth and reconciliation here is massive.
President Stipe Mesic understands this full well. He was curiously the last occupant of the rotating presidency of Yugoslavia in 1991, to whom Milosevic took strong objection in the role. A truly historic figure.
Reconciliation with Milosevic would never have been on, for the truth was he was a ghastly war-monger. He has gone, ousted in October 2000, and the truth is all coming out in The Hague. But reconciliation is now on with the new Serb leadership and the entire nation, less the other war criminals, today.
On September 10th Mesic went to Belgrade and met the Serb leaders. It was not the irenic commonplaces that were uttered that mattered, but that the event was taking place at all. It is now possible to believe that the Croats and the Serbs will never go to war with each other ever again.
For that to happen, however, they need to develop wider horizons and achieve economic growth. They are both now well aware of that.
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
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. Things are slowly on the mend.
Croatia wins incentive for EU entry talks
Croatia will be told in the near future it could start talks to join the European Union as early as next year if it improves its record on war crimes and treatment of refugees, the Financial Times reported.
A decision on Croatian membership of the EU could be taken by government leaders in June 2004, with final negotiations expected to take a further four years.
Gunter Verheugen, EU enlargement commissioner, believes Croatian membership could send a powerful signal to Serbia and other Western Balkan countries that democratic reforms will be rewarded.
But Verheugen said the EU must first be convinced that Croatia had made a definitive break from its turbulent recent past, and fully complied with the Union's entry criteria.
He will present with Chris Patten, EU external affairs commissioner, an opinion on Croatia's readiness to join the EU in March 2004.
In an interview Verheugen said the EU remained concerned about Croatia's lack of cooperation with the Hague war crimes tribunal. He said there were also reservations about treatment of returning Serb refugees, who fled atrocities in Croatia during the break up of Yugoslavia in 1991 and 1992.
But Ivica Racan, Croatian premier, will be told in Brussels the country has a realistic prospect of early EU membership if its addresses those concerns. Mr Verheugen said: "We should tell Croatia that they don't have to wait until other countries in the region have the same level of preparation.
"Croatia would increase the credibility of our democratisation process in the whole region."
His comments raise the possibility of Croatia joining the EU as early as 2008, a year after Romania and Bulgaria. Turkey is waiting to find out whether it can start entry negotiations.
Croatia has long resented being lumped together as part of the Balkans, insisting its cultural and religious identity - it is predominantly Roman Catholic and was part of the Austro-Hungarian empire - gives it a special place in Europe. The rest of the western Balkans is largely Orthodox or Muslim.
Croatia's identity was one of the reasons why Germany, backed by Britain, rushed to recognise the independence of Slovenia and Croatia in 1991 at the time that Slobodan Milosevic, former Yugoslav president, was using the nationalist card to prevent the country from breaking up. Human rights organisations have repeatedly argued that the EU should not give Croatia any dates for possible membership until it cooperates completely with the Hague tribunal in sending alleged war criminals to the court for atrocities committed in 1991 and 1992 against the Serb minority living in Croatia and against Muslims in Bosnia.
Over 33,000 people employed through government programmes
From March 2002 till August this year 33,748 people found jobs through six government programmes intended to stimulate employment. Employers found some programmes very interesting while the most vaunted one was "From University to Work," HINA News Agency has reported.
According to government plans, the programmes should provide employment for 36,772 people by the end of this year. Over the next five years 1.2bn kuna from the Employment Fund will be invested in all six programmes.
The "From University to Work" programme attracted the most public attention but also caused the biggest disappointment. Through this programme the Croatian Employment Institute [HZZ] was supposed to motivate employers, through benefits and cost-sharing, to give work to people under 27 who had graduated.
The programme intended to encourage students to complete studies sooner and return to their hometowns, and to discourage them from going abroad to seek employment.
However, from March 2002 through to mid-September this year, only 2,947 people, or 8.9 per cent of all who found a job, were employed through this programme. As early as last year it was evident that there was no interest in it since only 1,100 people of 7,050 envisaged found a job within 12 months.
HZZ manager Sanja Crnkovic-Pozaic agrees the programme bombed, which she puts down to wrong planning and an over-ambitious concept.
The programme has not been a complete misfire since more than 28 per cent of young people from this target group did find jobs.
Money spent on all six government programmes did not exceed interest in the programmes, given that all are financed from a joint fund and money is allocated when contracts are signed with employers.
Employers were most interested in the programme for the employment of trainees and the training of workers in line with labour market requirements. About 23,660 people, many more than planned, found employment through this programme.
A programme for older persons with experience also proved to be good, since 2,572 people found jobs by the end of August this year, as did a programme for the employment of war veterans which provided 4,327 with jobs.
Employers were less interested in a programme for the employment of craftsmen without prior experience and one for the employment of the disabled.
The government will decide later this year whether the programmes are to be implemented next year in the same or an altered form.
Foreign investments in Croatia total US$990m in first six months
Foreign direct investments in Croatia in the first half of 2003 totalled US$990.65m, and since 1993 they have risen to US$8.4bn, according to the latest data released by the Croatian National Bank (HNB), HINA News Agency has reported.
Foreign direct investments in this year's first six months have already exceeded last year's investments, which totalled US$980.51m.
According to the HNB data, of the US$990m of foreign direct investments in this year's first half, more than two thirds, or US$684.3m, was retained profit, i.e. reinvested gain.
According to branches of activity, figures show that more than a quarter of foreign investments, or 27.54 per cent, was directed into non-specialised retail trade, while slightly less than one quarter, or
24.23 per cent, was invested in the banking sector.
According to the investing countries, most foreign investments in the first half of this year, as well as in the past ten years, were made by Austria. In the first half of this year, Austria accounted for 30.23 per cent of foreign investments, the United States for 27.54 per cent, while Germany and the Netherlands accounted for slightly more than 10 per cent of foreign investments.
According to the HNB data, in the past ten years Croatian companies have invested a total of US$1.08bn abroad.
In the first half of this year, domestic companies invested US$26.58m in foreign countries, of which most investments were made in Serbia and Montenegro (41.92 per cent) and Bosnia-Herzegovina (32.37 per cent).
FOREIGN LOANS & AID
World Bank approves energy efficiency project for Croatia
The World Bank on 8th October approved the implementation of a project for improving power efficiency in Croatia, granting US$7m and giving a loan of US$5m to Zagreb, HINA News Agency has reported .
The purpose of the project is to facilitate the establishment of a market of energy efficiency in Croatia and help the country to become less dependent on the import of power.
The Board of the Executive Directors of the World Bank approved the project which would be financed by US$7m from the Global Environment Fund (GEF) and a loan of US$5m which would be given by the International Bank for the Reconstruction and Development as a part of the World Bank. The grace period is 10 years and the loan should be paid back within 20 years, the World Bank reported.
It is expected that commercial banks and beneficiaries of the project, will provide the additional US$27.8m.
The project should also encourage Croatia to use fuels that pollute the environment to a lesser extent so that the air quality may be improved through the reduction in greenhouse gas emissions.
Since 1993 when Croatia became a World Bank member, this institution has financed US$700m for a total of 22 projects, worth US$1.2bn.
Government issues guarantees for Croatian Highways company
At its closed-door session on 10th September the Croatian government decided to place 760m kuna (101.3m euros) worth of bonds on the domestic capital market to cover part of the deficit of the Croatian Highways company, HINA News Agency has reported.
The company will use the funds for the construction of the Bosiljevo-Split, Zagreb-Gorican and Rupa-Rijeka highways.
The government put up collateral for a 250m-euro loan which Croatian Highways is to be granted from a bank group consisting of Deutsche Bank AG, Singapore Branch, The Bank of Tokyo-Mitsubishi Ltd and Mizuho Corporate Bank Ltd, with insurance from Nippon Export and Investment Insurance.
The loan will be used to finance works on the Bosiljevo-Split and Zadar II-Prgomet highways.
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