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CROATIA





In-depth Business Intelligence 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 28,322 22,421 20,300 61
         
GNI per capita
 US $ 5,350 4,640 4,550 70
Ranking is given out of 208 nations - (data from the World Bank)

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REPUBLICAN REFERENCE

Area (sq.km)
56,542

Population
4,496,869

Capital 
Zagreb

Currency 
Kuna

President 
Stipe Mesic

Private sector
% of GDP 
55%


Update No: 113 - (26/10/06)

The EU remains the goal
In September European President Jose Manuel Barroso made it clear the European Union (EU) is not looking to acquire new members soon after the accession of Bulgaria and Romania in January 2007. This was obviously directed foremost at Croatia, the next obvious candidate. 
"After the enlargement of Romania and Bulgaria it seems to us that we are not in a position to integrate new member states without prior institutional reform," President of the European Commission Barroso told a press conference on September 26th in Brussels. In reference to Croatia, he added, "Of course I would like Croatia to join as quickly as possible if it fulfils all the criteria."
There are plenty of people in Brussels and elsewhere who think that the EU did not use the maximum leverage it should have done before agreeing to Bulgarian and Romanian entry to ensure compliance with its norms, notably on corruption and crime. The two countries are notorious for being rife with both. So to a lesser degree is Croatia.
Croatia started EU membership talks a year ago, hoping to join by 2010. Brussels has singled out corruption, along with the reform of the judiciary and public administration, as areas where much more effort is needed from Zagreb. 

Zagreb launches anti-corruption drive
It is not perhaps an accident, therefore, that Croatia has finally mustered the political will to uproot 'the octopus' of endemic corruption. This has sucked the country dry and still hampers its drive for European Union membership, President Stjepan Mesic has said. 
"Corruption has burdened Croatia for too long and it would be dangerous if we did not put an end to it. The nouveau riche who used their positions of political power to make fortunes in the 1990s are just smiling and expanding their business empires," he said in an interview on October 12th. "But now, there is political will to stop it." 
"Corruption is rooted in state institutions and public firms, where work is not transparent. They circumvent public bids and make public procurement through direct deals. If we could make the first cuts there, we could start dealing with this octopus," said the veteran reformer. Public prosecutors and a special anti-graft squad have stepped up their work this year, arresting some doctors and local officials accused of soliciting bribes. A recent survey showed Croats believed the most corrupt people are the politicians. 
"The institutions dealing with graft are telling me they are prepared to go the whole way and I hope that will be the case, regardless of who is being investigated," said Mesic. "The prime minister also agrees and he will not try to stop any judicial proceedings against anyone." Under the nationalist regime that ruled Croatia from independence in 1991 to 2000, the politically connected could get away with anything, he said. 
"They sucked the money from this country and its people for years," the president said. "Now, the climate is such that we can expect people to be held to account for doing something illegal, regardless of their position. Otherwise, why should kids go to school? Why bother if they see they can only profit if they're in the political loop?" 
Unlike Prime Minister Ivo Sanader, who publicly insists Croatia should join the EU in 2009, Mesic said he was not obsessed with dates. "I don't want to insist on dates. I insist on introducing European standards as fast as we can. That means passing laws and implementing them fully. If we do that, it will be recognised and the EU will want to take us in," he said. "There are a lot of areas where we are not ready, like the public administration and the judiciary. But we're on a good path and have done a lot in protection of ethnic minorities, freedom of the media, infrastructure." 
He also said Croatia was not a hostage of the politically turbulent Balkan region. "It would not be good if we travelled towards EU membership as a convoy, whose slowest member would set the pace. If Croatia joined first, it would be a model and an impetus to the others." 

Leaders discuss War on Terror, accessions to the European Union and NATO
There is also the US to consider. The better Zagreb's relations with Washington, moreover, the stronger an attraction Croatia will be for the EU. President Bush welcomed Prime Minister Sanader to the White House on October 17th for discussions that included the War on Terror, stability in Southeast Europe and US support for Croatia's accessions to the NATO and to the EU.
"This meeting will provide an opportunity for the president and the prime minister to further strengthen the partnership between the United States and Croatia," White House press secretary Tony Snow had said in a statement September 28th. Such has proved to be the case.
The United States has supported Croatia's commitment to become a full member of the Euro-Atlantic community. In May, Vice President Cheney visited Dubrovnik, Croatia, where he met with Sanader as well as Prime Minister Vlado Buckovski of Macedonia, and Prime Minister Sali Berisha of Albania. "It's very important -- both for NATO and the EU -- to take in new members," Cheney said at the meeting in Dubrovnik. "Those who aspire to join and rejuvenate such organizations," he continued, "help us rededicate ourselves to those basic fundamental values of freedom and democracy that are a very important part of our collective security arrangements." 
In 2003, the United States and Croatia, along with Macedonia and Albania, signed the Adriatic Charter. The charter reaffirms each country's commitment to strengthening its institutions in order to join NATO. It also reiterates the United States' intention to continue assisting the countries in implementing necessary reforms.
Sanader's October trip was his second to the United States this fall. On September 20th, he addressed the United Nations General Assembly in New York. In addition to discussing the political and economic accomplishments of Croatia since its independence, the prime minister also lobbied for Croatia to receive non-permanent membership on the U.N. Security Council for 2008-2009.

Ukrainain President Yushcheko welcomes President Mesic to Ukraine
Croatia has also made efforts to have good relations to the east, notably with Ukraine. President Victor Yushchenko welcomed President Mesic to Kiev on September 27th. 
First he thanked his colleague for coming to Ukraine to commemorate the 65th anniversary of the Babyn Yar massacre. In September 1941 Croatian Ustashe troops fighting alongside the Nazis perpetrated an appalling massacre. "This is a significant page in the history of Ukrainians and Jews and so we decided to honour the memory of the Babyn Yar victims internationally," he said. 
President Yushchenko added that Ukraine would insist that the Holodomor be recognized as genocide. He said ten parliaments, among them the US Congress, had passed this resolution so far and called for Croatia to "support all our initiatives on the Holodomor." 
Victor Yushchenko and Stjepan Mesic discussed ways to develop trade, economic, military and scientific cooperation. They also spoke about visa procedures and agreed to sign an agreement on readmission. The Croatian leader said the two countries should open markets to each other and build ties with big companies. President Yushchenko said Ukraine supported "open, liberal policy" and thus would gladly sign a free trade agreement with Croatia. The Ukrainian President then promised to help Croatian investors build a heart surgery hospital in Kiev oblast. 
Mesic invited his colleague to Croatia, a welcome invitation for more reasons than one . Croatia is one of the most beautiful countries in Europe, indeed the world.

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BANKING

HPB purchases 35% of shares in CDA 


Croatian postal bank (HPB) purchased 35 per cent of shares of Montenegro's Central Depository Agency (CDA) for 1.23 million Euro, Montenegrin independent portal Vijesti said, Croatia Today reported on September 27th.
HPB was buying a stake in CDA as a broker for one of Croatia's investment funds, the reports said. The starting price in the race for 35 per cent of CDA was 90,000 Euro, and was increased 14 times by the time the bidding was over, news website reporter.gr cited. 
CDA is the only database on shares in Montenegro. Montenegrin Central bank holds a 35 per cent stake in CDA, 25 per cent is held by business banks, while the remaining portion is held by company Fin invest. The chief CDA sources of revenues are commissions from stock exchange transactions.

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ENERGY

LNG terminal project deemed feasible

Plans for a Croatian LNG terminal have taken another step forward following the commencement of a feasibility study and the signing of a cooperation agreement among the project partners, Croatia Today reported recently.
While the project will prove a fillip to the Croatian gas market, it will also have positive implications for a number of surrounding markets if developed. The partners in the project, known as the Adria LNG Study Company, are Austria's OMV (28.37 per cent), Total (28.37 per cent), RWE Transgas (15.95 per cent), Croatia's INA (22.2 per cent) and Slovenia's Geoplin (5.11 per cent). The feasibility study is expected to be complete by late 2008. The project could be operational by late 2011. If developed, the project will provide a significant new source of gas into the Croatian market. Currently, Croatia has a relatively high degree of self sufficiency in gas, with indigenous production meeting around two thirds demand. The arrival of LNG into the country's energy economy will reduce reliance on Russian gas, currently its only source of gas imports. In proportional terms, gas plays a significant role in the Croatian energy mix, accounting for around 26 per cent of primary energy demand. With a 10 billion cubic metre annual capacity, the scope to import gas for onward distribution to surrounding markets is significant. Despite the presence of a number of significant LNG import projects on its own shores, Italy is likely to be a key market for LNG arriving at the terminal. Similarly, rapid demand growth in Eastern Europe will also provide a significant opportunity for the Croatian terminal to feed this demand growth. The Croatian government announced earlier this year that it was keen to take a 20 per cent equity stake in the project.

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FOOD & DRINK

Austrian NOM to buy Lura dairy business 

Austrian dairy industry, NOM, owned by powerful banking concern, Raiffeisen, is currently negotiating the acquisition of Croatia's Lura dairy business, news website reporter.gr cited "Croatia Today" as reporting on September 18th.
Lura officials refused to comment on these claims. NOM is at the same time planning construction of a new dairy in the region of Southeast Europe. The new dairy should be constructed during 2007, while NOM is currently searching for a suitable location for this greenfield investment, NOM officials stated. NOM is the second-largest Austrian dairy industry and employs 600 workers, and according to the annual turnover it is equal to Lura. NOM's last year sale revenues reached 280 million Euro, after 257 million Euro reported in 2004. Operational profits last year totalled 11.2 million Euro, after 14.6 million Euro in 2004. NOM is today one of the most profitable dairy companies in Austria, even though it suffered significant losses over business ties with Italy's Parmalat. 

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PHARMACEUTICALS

Barr acquires Pliva 

US-based Barr Pharmaceuticals Inc acquired a majority stake in Croatian drug maker Pliva one day before the expiration of its public bid, the Croatian central depository agency (SDA) said, news website reporter.gr cited "Croatia Today" as reporting on October 11th.
The SDA said that Barr has gained 13.5 million Pliva shares, or 72.75 per cent of the Croat company's total equity. Barr has offered 820 crowns (US$138.90) per share, valuing Pliva at around US$2.5 billion. Barr together with Pliva will create the third-largest generic drug producer in the world, behind Teva Pharmaceutical Industries Ltd from Israel and Switzerland's Novartis. Pliva saw generic business, including a strong input from biotechnology, as its main earnings driver after it gave up proprietary business in 2005 following considerable losses on the US market. Pliva operates in more than 30 countries and its main markets are Europe and North America. Barr, which has no operations in Europe so far, said it would make Pliva its headquarters for European business. Actavis complained that it had not been fairly treated in the process and that the largest domestic Pliva shareholder - the government, which owned 17 per cent of Pliva stock - did not meet Actavis's request for talks.
The European Bank for Reconstruction and Development (EBRD) accepted the offer from Barr Pharmaceuticals to purchase its remaining 5.4 per cent shareholding in the Croatian pharmaceuticals company Pliva at 820 crowns per share, news website reporter.gr said on October 2nd. 
This follows the decision by the Icelandic pharmaceuticals company Actavis to withdraw from the bidding process for Pliva. The EBRD has been a shareholder in Pliva for 10 years, having purchased 11 per cent of Pliva's shares at the company's IPO in April 1996. The bank's investment in Pliva was its first in a Croatian company. Pliva has since become one of the leading pharmaceutical companies in the region, with operations throughout Europe and in the US. The EBRD is the largest single investor in Croatia, where it has invested 1.5 billion Euro into 75 projects.   

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