Thursday, 4 March 2021

Banks' Net Profits Drop 53% in 2020, Recovery Expected This Year

ZAGREB, 4 March, 2021 - In 2020 banks' net profits were more than halved, while this year corporate and household lending is expected to pick up and demand for housing loans to increase, it was said on Thursday at a digital press briefing of the Croatian Banking Association (HUB).

Also presented was HUB's analysis of the banking business in 2020 and the response to the COVID-19 crisis which, it was said, resulted in a significant deterioration of banks' business results.

Net profits in 2020 dropped by 53.3% from 2019, to HRK 2.7 billion, mainly due to a drop in operating income and a growth in value corrections of financial assets --- amortisation expenses.

Net interest income dropped by 5.7% on the year, net fee and commission income by 10.5% and net business income by 9.9%. "This means that banks' income dropped a little more than Croatia's GDP in 2020," HUB director Zdenko Adrović said. Last year GDP contracted by 8.4%.

Banks' capital ratio at the end of 2020 was 24.9%, ranking them among the best capitalised banks in the world, which facilitates lending and deposit growth as well as low interest rates, he said.

Deposits and lending increased in 2020

In 2020 household deposits went up 6.1% on the year to HRK 224.5 billion, while in January 2021 they were up 7.1% on the year.

The fast deposit growth is mainly a result of giving up spending or the impossibility to spend part of one's income, said Adrović.

In 2020 household lending went up by 2.3%, with housing loans increasing by 7-8%. In Q4 alone, housing loans were up 14% on the year, while non-purpose cash loans dropped by 1% and overdrafts on transaction accounts by 5%.

Adrović said he believed that corporate and household lending would pick up in the coming period due to a rise in demand for housing loans. Part of the demand comes from the government's subsidised housing scheme and it is also due to last year's earthquakes, he added.

This year demand for housing and corporate loans is expected to improve and, thanks to existing interest rates, result in higher income and net profit for banks, Adrović said.

Last year corporate loans went up 5.3% while this past January they increased by 5.7%, he added.

Thanks to an average interest on long-term housing loans of 2.9% and no big pressure on interest growth, Croatia is doing very well, he said, noting that interest rates were markedly lower than in more developed countries which have been in the EU longer than Croatia, such as the Czech Republic, Hungary and Latvia.

(€1 = HRK 7.5)

Saturday, 23 January 2021

COVID Pandemic Identified as Top Business Risk in Croatia

ZAGREB,  23 January, 2021 - The COVID-19 pandemic is perceived as the top business risk in Croatia in 2021, cyber incidents rank second, while changes in legislation and regulations and lack of skilled labour force share the third place, according to the Allianz Risk Barometer.

The tenth annual edition of the barometer, issued recently, is based on the findings of a survey conducted by Allianz Global Corporate & Specialty (AGCS) following interviews of 2,769 specialists and experts from 92 countries and territories. Some of the respondents are Chief Executive Officers, risk consultants, underwriters, senior managers, claims experts in the corporate insurance segment of Allianz Global Corporate & Specialty and other Allianz entities.

The survey was conducted in Croatia before the 29 December devastating earthquake in the Petrinja region.

As many as 54% of the respondents in the country cite the pandemic as the biggest risk, while cyber incidents follow (31%), and changes in legislation and regulations have been stated as a business risk in 26% of the answers. In the previous four years, this was identified as the top business risk, according to this barometer.

The shortage of a skilled labour force is also mentioned as a business risk in 26% of the interviews in Croatia.

Allianz Croatia CEO Daniel Matić was quoted as saying that the impact of the pandemic and the COVID disease on doing business in Croatia is perceived in the same way as in most countries.

Matić speculates that had the survey been conducted after the quakes in Petrinja and Glina, the risk called "Natural catastrophes" would have had climbed to a higher position on the barometer.

Matić underscores the labour shortage as a high risk for doing business in Croatia.

Many industries, including tourism and the ICT sector, are faced with this problem, he said.

The importance of this issue can be seen in the example of the necessary labour force for rapid repair response in the aftermath of the quake in Petrinja, Sisak and Glina, he explained.

"Given the unprecedented disruption caused by the coronavirus outbreak, it is no surprise that business interruption and pandemic outbreak top the 2021 Allianz Risk Barometer," according to the explanation given on the Allianz Global Corporate & Specialty web site.

"The pandemic is the biggest climber this year (up 15 positions), with cyber incidents ranking a close third. All three risks – and many of the others in this year’s top 10 – are interlinked, demonstrating the growing vulnerabilities and uncertainty of our highly globalized and connected world, where actions in one place can spread rapidly to have global effects. Looking forward, the pandemic shows companies need to prepare for a wider range of business interruption triggers and extreme events than previously. Building greater resilience in supply chains and business models will be critical for managing future exposures."

The top ten business risks globally identified in the barometer are: Business Interruption, Pandemic outbreak, Cyber incidents, Market developments, Changes in legislation and regulation, Natural catastrophes, as well as Fire and explosion, then Macroeconomic developments, Climate change/increasing volatility of weather, and Political risks and violence.

Saturday, 5 December 2020

Faculty of Economics University of Zagreb Celebrates 100 Years

ZAGREB December 5, 2020 – With over 9000 students currently enrolled, the Faculty of Economics University of Zagreb is the largest faculty in Croatia. In 2020, this internationally renowned institution celebrates its 100th birthday, so TCN decided to take a closer look.

Every other student you meet in Croatia seems to study economy. It makes you wonder where they all go to after their studies are complete. Are there really so many positions for economists in Croatia?

In 2020, the Faculty of Economics University of Zagreb celebrates its 100th birthday. The long list of its famous former students gives a clue to where all the Croatian economists go – the tourism sector, diplomacy and international relations, business, politics and government.

SG-council-of-europe-2020-42020.jpgMarija Pejčinović Burić, a graduate of the Faculty of Economics of the University of Zagreb and the current Secretary General of the Council of Europe. After graduating, like Savka Dabčević-Kučar, she became o doctor of economics and before taking her current position served as Croatia's Deputy Prime Minister and Minister of Foreign and European Affairs © Council of Europe

Graduates of the Faculty of Economics University of Zagreb have served as mayors of Zagreb and Split, Deputy Prime Minister of Croatia, Minister of Finance, Minister of the Economy, Secretary-General of the Council of Europe, Governers of the Croatian National Bank, Vice-President of the UN World Food Council, President of the Croatian Football Association, Minister of Environmental and Nature Protection, special advisors to the President of Croatia and countless university professors, including several former rectors of the University of Zagreb. Within its graduate professors, it has produced no less than 19 full members of the prestigious Croatian Academy of Sciences and Arts, more than any other single institution in the country.

wikiSlavka.jpgSavka Dabčević-Kučar, a graduate of the Faculty of Economics of the University of Zagreb. Born on Korčula, she became an anti-fascist in World War II, joining the partisans after her brother was beaten by fascists. After graduating, she continued to study at the faculty and became one of the first doctors of economics in Croatia, raising eyebrows by choosing to write her doctorate dissertation about a non-Marxist economic theorist (Englishman John Maynard Keynes). She became a professor at the faculty in the 1950s and despite her great advances in political life, remained a committed teacher at the faculty until 1971. In 1967, she was elected President of the Socialist Republic of Croatia. In 1969, she moved to an even more important position - that of president of the Central Committee of the League of Communists of Croatia. She was the first woman in Europe to be appointed head of government of a political entity and the first female in Croatia to hold an office equivalent to a head of government. In this picture, she addressed supporters on Ban Jelacic Square Zagreb during the movement called the Croatian Spring, which called for greater autonomy for Croatia. At the address, thousands cheered her as “Savka, queen of the Croats”. For her pivotal role in the movement, she was removed from her positions and public life and retired. She returned to politics in 1990 upon the collapse of communism in Europe and during the Croatian war of independence was one of the few politicians who visited the front lines of battle in Slavonia, Petrinja, Pokupski and the Dalmatian hinterland

The Faculty of Economics University of Zagreb is the largest faculty in the country. Over its 100 year history, it has established itself as an internationally respected institution. Today, it has around 9000 persons enrolled, caters for international students with some courses in English and has produced over 86, 000 graduates, including 856 doctors of science.

muo_zagreb_povijestmimara.jpgIn its infancy, students of the College of Trade and Transport were taught at the Technical College, which is today the Museum of Arts and Crafts in Zagreb © National and University Library in Zagreb

The history of the Faculty of Economics University of Zagreb starts with the opening in 1920 of its forerunner, the Zagreb College of Trade and Transport. Its purpose was to educate in the areas of banking, domestic and international trade, transport, consular services, insurance and the education of teachers. Its courses lasted three years and it proved so popular that in the academic year 1923/24, some 1,125 students were enrolled.

The institution held college status until 1925 when Stjepan Radić became the Minister of Education. It must have been unusual for Radić to find himself as part of the government of the Kingdom of Serbs, Croats and Slovenes, the state which preceded the Kingdom of Yugoslavia. Today, Radić is best remembered as a politician outspoken in his advocacy of autonomy for Croatia. Before his appointment to the government, he had always done so in opposition. Indeed, he had been imprisoned several times for his views, which were proclaimed loudly in his writings or in person (he was a gifted public speaker). As recently as March 1925 he had been in prison but, when the political party of which he was a member officially recognised the monarchy and the state constitution, he was freed. In a remarkable turnaround, before the year's end, he was a minister in the government.

Stjepan_Radi_2.jpegStjepan Radić, pictured in the 1920s © public domain. In 1895 Radić was sent to prison for the public burning of the Hungarian flag in Zagreb – alongside Antun Dabčević, the father of Savka Dabčević-Kučar.

Stjepan Radić's desire for Croatian autonomy was not born from the ideals of the political class of Zagreb. The ninth of eleven children, born to a peasant family in a small village on the banks of the Sava river, just north of Sisak, Radić was very much a representative of the people whence he came. To him (and others in his family – his brother and nephew also being prominent politicians), education had the most important role to play in emancipation. He had lived in poverty in order to complete his own - after being banned from university-level educational institutions throughout the whole of the Austro-Hungarian empire for his protests against the state, he travelled penniless to Russia, France and Switzerland to complete his studies. In the latter, finance was one of his chosen subjects.

efzg_zvonimirovafirst.jpgThe first dedicated building of the Higher School of Economics and Commerce was located on the corner of Bauerova and Zvonirmirova © Faculty of Economics University of Zagreb

Under Radić's spell in office, the Zagreb College of Trade and Transport became the Higher School of Economics and Commerce. Its courses extended to four years, it attained university status. With no building designated to the increasingly popular institution, students had sometimes been taught at the Technical College (today's Museum of Arts and Crafts) and in parts of what is now the Mimara Museum. A dedicated home for the faculty was authorised and its construction started in 1927. Classes began at the faculty, located on the corner of Bauerova and Zvonimirova, in 1928, but within the decade the institution had outgrown its home and a plot of land in Svetice was acquired in order to build a new, larger facility. Its construction was interrupted by the Second World War and students would end up being taught on the Bauerova and Zvonimirova site all the way up to 1952.

efzg-1980-ihuniverz.jpgThe faculty's modern building, pictured in 1987. Today, the faculty has 17 departments - Finance, Demography, Economic Theory, Business Economics, Informatics, Macroeconomics and Economic Development, Marketing, Mathematics, International Economics, Business in Foreign Languages, Organization and Management, Law, Accounting, Statistics, Trade and International Business, Tourism, Physical Education and Health © Faculty of Economics University of Zagreb

In 1947, the Higher School of Economics and Commerce became the Faculty of Economics University of Zagreb. In 1952, the faculty officially moved to the new site in Svetice. In 1968 it expanded once more when it merged with the 12-year-old College of Economics. Since then, the building at Svetice has received major upgrades and further facilities of the faculty can now also be found at the university campus in Borongaj, in Varaždin, in Koprivnica and in Bjelovar. After a century of existence, the Faculty of Economics University of Zagreb's longstanding difficulties to meet the popularity of its courses with the space available are now over. Not only can they accommodate every Croatian economy student who makes the grade, but they are also able to offer places to some of the best international students. It would surely come as no surprise if they are still educating the future elites of business, banking, finance and politics in another 100 years.

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The Faculty of Economics University of Zagreb site in Svetice, as seen from its garden © Wolf - Pidgeon

Thursday, 24 September 2020

Higher Interest in Croatia among Foreign Investors, Conference Hears

ZAGREB, Sept 24, 2020 - There is a markedly higher interest in Croatia among foreign investors, partly owing to EU membership and partly to the business transactions of recent years, Daniel Radic of the KPMG consulting firm said on Thursday at the ''Investing in Times of Uncertainty'' conference.

Companies from the Agrokor system have also put Croatia on the investors' map, he said, adding that he did not see the COVID-19 pandemic as having affected investor confidence.

The conference was organised by the Enterprise Investors fund and the American Chamber of Commerce in Croatia.

Enterprise Investors has been continuously looking for new investment opportunities in the Adriatic region, including Croatia, while the Studenac retail chain has identified potential acquisitions expected to be made by next year, said Michal Kedzia, a partner in the fund.

Enterprise Investors is one of the leading private equity funds in Central and Eastern Europe. Last year it bought the Pan-Pak bakeries chain and Studenac in Croatia, having previously bought the Intersport sporting gear chain.

Kedzia said the fund was looking for new investment opportunities not just in retail but in IT and technology as well.

Asked if the fund was interested in investing in Croatia's Ledo frozen food producer, he said the fund, as a rule, did not comment on transactions.

The question was put because the Fortenova group said this week that it had received a score of non-binding offers for Ledo Plus, Ledo Citluk and Frikom, which make up the Ledo group.

EBRD focused on green investment

The European Bank for Reconstruction and Development is focused on helping the private sector, notably green investment such as renewables, the food industry and the IT sector, said Miljan Zdrale, head of the EBRD agriculture sector for Central and Southeast Europe.

The EBRD's goal is for green investment to account for 50 percent of all investment by 2025, he added.

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Saturday, 19 September 2020

Lifestyle Check IN Presented to Public for First Time

September 19, 2020 - On Friday, Lifestyle Check IN was presented to the local public for the first time on the terrace of the Radisson Blu Resort in Split.  It is a series of business events whose previous two editions were held in Austria.

Lifestyle Check IN is an event whose goal is to connect Croatian companies with European ones, whose products and services nurture the philosophy of comfortable living, such as fashion, cosmetics, home decoration, and the nautical industry.

"Lifestyle Check IN will be held in Split because this beautiful city embodies the philosophy of comfortable and beautiful living. Split is an ideal place for living, but also for business, so on October 15, in addition to Croatian lifestyle brands, their colleagues from Austria will present their products to the domestic business and the general public.", said Monica Ioanitescu, the conceptual originator and project director.

Although most brands are aimed at women, the offer won't neglect men or children - men will have a cigar area, while children will enjoy a dedicated playroom organized with entertainment and educational programs for all ages. 

President of the Split County Chamber - CCC, Joze Tomaš, gave his full support to the organization of this business event.  

The event was also joined by a famous Austrian entrepreneur and fashion designer, Dali Oleschko, and local entrepreneurs were introduced by Marko Bilić from Cigar Club Mareva. Jan de Jong, entrepreneur and currently the most prominent member of the Split expat community, pointed out that "people here complain a lot and do nothing, and it is these holes that are ideal for those who have an idea and are enterprising".

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At the first event to take place on October 15, the partner country is Austria, and three more events are planned in the first half of 2021, when Split will be hosted by entrepreneurs from Romania, Italy and Slovenia.

"The event is open to all, we invite domestic business, but also the general public, provided that the number of available tickets will be defined later and in accordance with the recommendations of experts. Health is our number one priority, but entrepreneurship must not stop, we just need to invest a little more creativity to continue to connect and do business together in new circumstances", Monica concluded.

This event supports the association "Dancer with Cancer"and the organization is carried out with the support of the sponsor "Juelstox international", with a collection of jewelry from Sri Lanka and the Romanian brand "VeroSlim"

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Thursday, 17 September 2020

One-Stop-Shop Opens in Split, Offering Support to Foreign Entrepreneurs

September 17, 2020 - A conference of the TASKFORCOME team was held on Wednesday evening to encourage the development of foreign entrepreneurship in the City of Split. A one-stop-shop is an initiative intended for facilitating the process of opening a business for future citizens of Split.

Opening your company in a new country is very challenging, especially in Croatia, because of its exhausting bureaucracy. Everyone who tried to start their business here is familiar with filling out tons of papers and knocking on thousands of doors to get an answer. 

"We will try through this project to bring this whole process closer to you, to your friends or anyone who has some ideas about starting their own company, start-up, or becoming a social entrepreneur", Marin Urlić, from CEDRA Split, said.

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Toni Jerković from the Service for International and EU Projects of the City of Split welcomed all gathered and explained that Split is not only a destination for rest and entertainment but can become the core of development and launching entrepreneurial ideas and ventures.

"We believe that Croatia, as part of the European Union, is developing and opening to foreigners that want to start their business here. In this project, the City of Split saw an opportunity to equip the now-abandoned space in the Multimedia Cultural Center (better known as the Youth Center) and open a one-stop-shop, and thus use the potential of empty public spaces for the benefit of not only immigrants but also the local population", he stressed.

Those interested will be able to get free advice and support in starting a business - from consulting tips for developing plans, strategies, and processes in their company to marketing, financial and other advice for the development of innovative products.

It is expected that the one-stop-shop will be equipped by the end of this year, and civil society organizations from the Youth Center Platform will also operate in that area.

Michael Freer, who moved from Great Britain to Split five years ago, shared his experience. He fell in love with the mountains, sea, and the climate and decided to stay. He used to work for CEDRA Split, but he left them for his own company, Ensoco. He wants to share the first-hand experience and help others with useful information when starting a business in a new environment where you know neither the language nor culture.

"Through this project, we want to help all foreigners from all countries from Bosnia and Herzegovina, Serbia, Albania, China, from EU member states. Those from BiH and Serbia, as well as from Russia, know the language, they can communicate here, but they need advice on starting a business. We want to create an ecosystem between local people and foreigners to show that Croatia is not just a place for a week or two vacation but a great place to live", Michael explained.

Besides Michael, Sarah Dyson from Expat in Croatia and Nick from 45 degrees sailing also shared their experiences.

IMG_20200916_182502_12.jpg

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Wednesday, 26 August 2020

INA's Layoffs Decision Is Business Decision, Says Minister

ZAGREB, Aug 26, 2020 - Economy Minister Tomislav Coric said on Wednesday INA's decision to lay off 250 workers was a business decision, and that INA recently submitted a proposal to the Strategic Projects Commission to declare the Sisak biorefinery a strategic project.

Asked by the press to comment on the announcement that 250 INA workers would lose their jobs, Coric said there was no satisfaction if people lost their jobs at the end of a process of transformation, but that INA's business decisions of several years ago were going in that direction.

"The thing that we can express satisfaction about, is that the workers are leaving with relatively favorable severance packages."

The oil company said earlier this week that, given the circumstances of operating during a pandemic, the INA Group began organizational changes and that the restructuring would cover a maximum of 250 workers. This news has caused great concern in the town of Sisak and the Sisak refinery, whose workers have warned that the layoffs would halve the refinery's staff.

Asked about the layoffs, Coric said the company's direction was its decision and that the global oil business was in trouble because of the coronavirus and other circumstances.

He said he was pleased that INA's proposal to declare the biorefinery in Sisak a strategic project, was recently submitted to the Strategic Projects Commission.

We are pleased about that because I think that the direction which INA is taking in fact - a sustainable, green direction - is the right one, Coric added.

INA council to discuss Lazard's final report soon

The minister said the government received Lazard's final report on INA. The company is the government's advisor on the possible buy-back of MOL's stake in INA.

He added, however, that the make-up of the council on negotiations with MOL on the possible purchase changed last week. "In the weeks ahead, that report will be presented to the council members and then we will go a step further."

Asked if the political decision to buy back the stake was still on, Coric said the government decided to do that in 2016 and that the decision was confirmed in the HDZ's platform for this year's parliamentary election.

"We will try to enter into talks with the other side, present our offer and try and restore Croatia's ownership of INA."

A member of the press remarked that consultants said the buyback was not worth it. Coric said that he did not have that information.

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Friday, 24 July 2020

Croatia First in World to Use Contactless Card Payment Tech for Online Customer Reviews

July 24, 2020 - Croatia first in the world to use contactless card payment technology (NFC) for online customer reviews, a game-changer for business globally

In the modern era, there's no better promotion for your business than online customer reviews. Comments and ratings on platforms like Trip Advisor, Google and Facebook have replaced slow and unreliable word-of-mouth recommendations in the digital age.

But, how to get those reviews? A huge proportion of goodwill from satisfied customers is lost forever the moment they step out of the door. They can forget every detail of your business, their experience or maybe they just don't find the time.

Review Booster Pro, an innovative platform from Dubrovnik, offers the best solution yet. It uses NFC – the same technology used by credit cards for contactless payments – to facilitate on-the-spot online customer reviews in super-fast time. It's a simple solution that could be a game-changer for business globally.

“I'm the CEO and owner of the Mint Media digital agency,” explains Ivan Ivušić who has developed Review Booster Pro.”We work with a lot of clients in the tourism sector. Over the past few years, we got a lot of requests from clients about how to improve their online reputation. Their main concern was how to improve their ratings and increase their number of reviews of Trip Advisor, Google, Facebook and other platforms, in order to get more visibility and more customers.”

“We tried many different solutions; business cards with QR codes, something you scan with your mobile phone which would take you to a web page where you write reviews. But, the main problem was the speed. Once customers leave a venue, they don't find the time to write reviews or they don't remember the name of your business. So, the conversion rates were low. So, we needed something quick and simple, so customers can leave reviews on the spot. This is what the market needs.”

Their solution was to employ NFC - Near Field Communication, the technology you use to pay contactless with your credit card. All newer mobile phones are fitted with this technology. Businesses signed up to Review Booster Pro have RBP boards, which they present to customers after their experience – for instance, while you're waiting for your restaurant bill. You simply wave you phone over the board, the phone's operating system reads the chip, your web browser opens automatically and takes you to the RBP landing page of the business you're in. You then select which of the platforms you're already signed up to - Trip Advisor, Google, Facebook etc. - and leave your online customer reviews.

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© Review Booster Pro

“The RBP boards are around the size of a large mobile phone – and these can be presented to the customer or even positioned permanently on every table in your bar or restaurant; hotels, dentists, hair and cosmetic salons, retail stores, tourist guides and agencies are also some of our clients,” explains Ivan. Aside from encouraging simple and super fast reviews, businesses using the RBP platform obtain other benefits. On their RBP landing page, where they can place their branded logo and individual text, they can also use banner advertising space to promote existing partners or market different sections of their business. For instance, while a customer is leaving a review of the hotel bar, they will be shown the details of what's on offer in the hotel's spa.

Business owners can measure the clicks on each individual board they have. Therefore, a restaurant owner will be able to see which of his staff is obtaining the most reviews. Previously, such information would have been complete guesswork, unless an individual server is specifically named by a customer in a review.

“All of our current clients were already well aware that this is exactly what they need,” says Ivan. “It took about 10 minutes to sell each of them this product. In our extensive preliminary testing, businesses that were averaging 3 reviews a day went up to receiving 15 reviews per day. It's really a game-changer.”

Future plans for RBP are extremely exciting and they are already searching for ways to move the technology into different forms – imagine having the RBP chip implanted within a laminated page at the end of your restaurant menu. But, for now, the next step is to be recognised by one of the biggest three review sites.

“Trip Advisor has a separate platform (RCP) which you can partner with, to offer projects that will get them more reviews,” says Ivan. “Our product will be particularly beneficial to them because it not only increases their number of reviews, it also increases user acquisition.”

“We are processing our application to become one of these partners. They have different tiers of partners, so if you are successful and reach the top, Trip Advisor then promotes you as a solution to all the businesses worldwide who hold accounts on their platform. That's our goal. And I have every confidence we will reach it because all other solutions rely on software, many on downloading a separate app. We found no other solution in the world right now that is using NFC technology for this.”

Tuesday, 28 April 2020

Has Coronavirus Crisis Revealed Croatia's Ability for Efficiency After all?

As Ana Blaskovic/Poslovni Dnevnik writes on the 28th of April, 2020, much like if Croatia was placed under a strong magnifying glass, the coronavirus pandemic has showcased the many inefficiencies and the illogicality of the current Croatian system surrounding the economy.

At the same time, it has shown us that a change for the better is indeed more than possible and that the efficiency of the Croatian public apparatus is not a mere myth but a possible reality. What a shame it has taken a global pandemic to bring that to our attention.

When there has been no alternative, government institutions have proven their ability to be fast paced, their readiness to embrace digital processes and to become goal driven. Although whether or not the grants of 4,000 kuna for job retention are an optimal measure or not, the decision has been made and the application and payment process have carried out very well by the Croatian Employment Service and the Ministry of Finance.

The rapid introduction of e-passes (e-propusnice) shows that Croatia is ready at all levels to introduce and implement modern and digitised processes, but at the same time, the number of issued e-passes points to an over-fragmentation of the territorial organisation.

The introduction of Andrija showed truly excellent cooperation between Croatian and foreign companies in the creation and perfection of a smart and innovative technological solution. The state apparatus is enormous, and the number of people who can truly complete actual projects and tasks sought by the public is very modest, which makes it seem as if Croatia is not taking full advantage of its opportunities and potential at all.

If the ongoing coronavirus crisis has taught us something, it's that Croatia can indeed be efficient and orderly, and our biggest fear now should be us simply going back to our old and outdated ways under the pressure of the loud and self-serving minority who don't want to evolve or respond to change.

After the initial hesitation, the aid measures for the Croatian economy aimed at the right goal. The proposals were addressed to the Croatian Government from various institutions, and in fact, these economic measures should make the Croatian economy agile, fast, resilient and ready for the upcoming market struggle.

Coronavirus came knocking at Croatia's door when it was in a totally unprepared state in many ways. The idea of working from home, while popular, isn't adequately regulated in Croatia and this is one of the issues that needs to be addressed urgently independent of the coronavirus pandemic, since working from home is a trend that absolutely must survive even after this threat is history. It's a way for working parents to cope better, and it's a way to give young people more flexibility.

Croatia is also missing a real grasp on the idea of putting people on ''standby''. In fairness, the country did have something similar during the war, and we'd do well to incorporate an upgraded version of that in the present extraordinary circumstances. Slovenia put its workers who were unable to go to work on a ''standby'' basis and secured 80 percent of their wages, freeing employers from too much burden, who were already struggling to preserve their business bases.

AmCham also demanded that such workers in Croatia be allowed to receive, if not the Slovenian, French or British variant of the payment of 80 percent of their net salaries, or the Czech Republic's payment of 60 percent of their net salaries, then the amount provided by the CES, with certain employer obligations needing to be met along with it.

Although the argument against that is the fact that the Croatian solution allows for the payment of 4,000 kuna net irrespective of whether the employee is working or not, the employer has an obligation to pay the rest of the person's wage up to their usual full pay, and it is therefore still necessary for them to go through the whole long and exhausting administrative process with workers who aren't currently working in order to reduce the salary in these circumstances when all the time available should be focused on keeping the basics of the business, retaining customers, suppliers and employees who are still able to work.

Croatia has chosen the egalitarian principle of support for maintaining jobs with a net cash sum of 4,000 kuna. The argument for such an approach is certainly the simplicity that allowed for its speed of implementation. Despite its shortfalls, this measure protects, above all, lower-paid jobs and lower-valued industries.

However, this approach increases the chance of seeing highly specialised professionals become unemployed, and as such weakening Croatian firms in the aftermath of the coronavirus crisis when they return to the market. In addition, better-paying jobs, on a regular basis, contribute more to the budget, so it would be fair for them to be able to get more in the crisis.

How can we re-launch the domestic economy?

The tax and contribution write-offs for those affected by the coronavirus crisis are only for small businesses with a high turnover decline. Such a measure doesn't allow other companies a good start with re-beginning business operations, but instead becomes a heavy weight. Retaining workers with a delay or the partial write-off of taxes and contributions means that months or years after the re-launch of ''normal'' business, companies will continue struggle with the burden of these fees.

Large companies with a fifty percent or more drop in turnover, which is already a bankruptcy threshold for them, are allowed a proportional write-off of their regular taxes and contributions.

Given that it is crucial that in the period following the cessation of these special coronavirus-induced circumstances, economic operators must be able to initiate economic recovery rapidly. So it must be considered essential that economic operators aren't continually burdened with the tax liabilities that arose during the crisis. Coronavirus could finally bring a more significant cut in para-fiscal levies as a measure of easing the burden on the economy.

Make sure to follow our dedicated section for more on coronavirus in Croatia.

Saturday, 4 April 2020

Croatia's Entrepreneurs Use Guile, Luck To Fight 'Coronavirus Economy'

April 4, 2020 — Runner, entrepreneur and tourism innovator Berislav Sokač saw the early warning signs when governments called off punishing 24-mile races.

“Oh, I knew when things were going to be bad… when the Tokyo Marathon was canceled,” he said.

The founder and head of Run Croatia, a platform focused on sports tourism, is used to the pain-gain logic which binds suffering and improvement. He is, after all, one of the country’s most-accomplished runners.

But his Zagreb-based business hasn’t encountered a challenge like COVID-19. The ban on public gatherings and large groups put the kibosh on all scheduled events and runs. More than a cough and fever, the virus cut the legs off the nation’s largest running platform.

It puts Sokač and many other members of the Glas Poduzetnika (Voice of Entrepreneurs) in the unenviable position of trying to keep their companies afloat with zero revenue. The organization of small business owners, artisans and self-employed emerged in March to advocate economic measures meant to ease the pandemic's effect on entrepreneurs.

Business owners in a series of interviews with Total Croatia News expressed a mix of uncertainty, grit and hope in the face of fluctuating conditions. Despite a daily drumbeat of new infections and deaths.

For some, vital agreements fell through, reverting them to a one-man-show operation. Others shut down operations, kept workers on the payroll and are negotiating with landlords and creditors.

They, like Sokač and many others, expect pain with no promise of gain.
They welcome early interventions by the government and hope for further action. Quick thinking and a bit of luck have them predicting survival and even long-term renewal — whenever this grim period ends.

Inadvertently prepping for government help

Orlando Lopac ordered equipment for his fitness company, but it ran late at the end of February.

The founder and owner of Zagreb’s ubiquitous Orlando Fitness Group knew delayed shipments from US-based companies often betray a bigger problem in the production chain. A few phone calls to suppliers in Taiwan and talks with colleagues in Italy confirmed the worst.

“That’s when I understood the seriousness of the whole situation,” the 48-year-old said.

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The equipment at Orlando Fitness now sits untouched.

The ensuing weeks included whirlwind preparations, all-hands meetings and planning: provisions made in case of forced closures; financial plans drawn if clients couldn’t go to one of OrlandoFit’s three Zagreb locations.

Communications strategies — bulletins, social media posts, emails — drafted in late-night writing sessions, laying out in plain language how memberships would be prorated to a later date.

“We always tried to be three days ahead of the virus,” Lopac said. “People have put a lot of trust in us.”

Then, on March 19, the government ground public life to a halt, closing all businesses that didn’t sell food or medication.

Lopac’s fitness centers would be dormant indefinitely.

The prepared social media posts and emails were met with understanding by customers.

Lopac and his crisis team laid out a financial strategy to keep the company’s employees on the books. It called for painful cuts in wages. Then, an all-hands meeting to break the news.

“We told them what’s coming is very hard,” Lopac said. “We told them our cash flow would dry up.”

Byzantine bureaucratic labor rules meant just one worker’s dissent would topple the plan, setting off a daisy chain of ugliness which would kill the company.

His 30 full-time employees would need to annex their contracts and become minimum wage workers. Then, stay at home and hope the pandemic wouldn’t last longer than the two months-worth of salaries the company could cover.

Lopac spent more than an hour presenting the plan to his workers, explaining the maths and answering their questions.

“Because we made the presentation face-to-face, and spoke directly and took the time to answer questions, they all accepted,” Lopac said. “If I sent it all in a long email, I wouldn’t have a company right now.”

Then, a stroke of luck.

The Croatian government on April 2 unveiled a second set of economic measures designed to prevent massive private sector layoffs.

Prime Minister Andrej Plenković said all minimum wage employees’ salaries would be covered, while raising the minimum to 4,000 HRK. The plan also added three months of tax breaks for qualifying businesses.

Lopac’s two-month lifeline and pay cut became a great idea.

Business owners greeted the government’s measures with open arms. Labor Minister Josip Aladrović said within days 69 employers signed up, keeping over 410,000 employees on their books for March.

Most applicants were from the catering and service industries, Aladrović added, reflecting the 53 percent drop in overnight stays last month. The nationwide shutdown of hospitality businesses also forced a 90 percent drop in turnover in the industry at the end of March. Croatia was emptying.

The measures offered some leeway for the marathon runner Sokač and fitness guru Lopac. Both will use them to their full advantage.

“It wasn’t easy giving someone pay while they sit at home and do nothing,” Lopac said.

By reducing employees’s compensation to minimum wage, they avoided layoffs. With the Croatian government covering wages, they can shift that loss off their books.

“Now, we aren’t saddled with any large expenses and production costs,” Sokač said.

Equally important for both, they feel the small business community became the fulcrum of public policy at the national level for the first time.

“The government was ready to listen,” Sokač said. “The entrepreneurial establishment was heard. That’s a lot of small gears holding up the economy.”

Lopac expressed a more befuddled view.

“What angers me the most… were we really supposed to come to a pandemic to get to a normal level of communication between the government and entrepreneurs?” he asked. “Did it have to come to this?”

Guessing government’s next pool of measures has become a favorite parlor game for economic watchers and business owners.

Some belt-tightening already began this week.

Plenković put a moratorium on new public sector hires within his government. He also froze the second search to buy fighter jets.

Even the seemingly recession-proof local Croatian public sector experienced cutbacks. City administration employees in the City of Pag, for example, will see 20 percent pay cuts. Ditto workers at city-owned companies.

What’s left to cut? Many eye the mandatory fees charged to business owners every month — forests, water, radio and television frequencies, among others. Early rumors suggested the government would scuttle the levies. They remain for now.

How bad can it get?

drazen-tomic-ictbusiness-by-damir-brkic.JPGDražen Tomić greeted 2020 with a slate of 17 conventions ahead of him. The media guru, journalist and editor owns and operates a collage of sites, including ICTBusiness, GamePerspectives, a production company and two YouTube channels

Events around Europe and rest of the world develop the contacts and stories his bundle of media companies churns out at a substantial clip. The gatherings are all on hold or canceled outright — as Tomić expected.

“Those who understood anything about virology knew that the virus would leave China,” he said.

Worse than the conventions, the photography and video gigs garnering additional revenue have all fallen through, leaving an immeasurable hole in his company’s finances.

“If someone asks me what’s my revenue now, I have no idea,” he said. “Some jobs were already agreed upon. Some were in the works. Some are renewed every year. Some were a head nod and promise to get something done. They’re all on hold now.”

For Sokač, Run Croatia’s numbers are grim. He forecasts a 70 percent drop in revenues this quarter, and a 40 percent drop if the crisis lasts into autumn.

A blow to the tourism industry would be devastating. He pointed to a race organized in Novalja, where 70 percent of registered runners would come from outside the country. Closed borders would leave him reliant on the 30 percent of Croatian participants — if they show up.

A continued moratorium on public gatherings would cancel the race — a 100 percent loss.

“Worst case scenario, we’re looking at an 80-90 percent drop,” Sokač said.

Holding onto employees

Tomić’s company relies heavily on him, one full-time employee and eight others working in a freelance capacity.

That circle is tightening.

“I have a small firm,” he said. Halting isn’t an option. “In this company, a lot of things rely on me. I either work or I don’t work.”

He doesn’t expect layoffs.

Sokač first reached out to the social media influencers and people he outsources to, telling them the races earning them money may be canceled. Then came the “crisis meeting” with employees, a common response with nearly all the business owners interviewed.

He told his workers they’d weather the pandemic using whatever measures were available, keeping Run Croatia alive in some iteration.

“I’m not prone to panic,” Sokač said, adding his employees share his demeanor. “I’m lucky that the people who work for us also live for what we do.”

He knew the run-friendly business would likely fall off significantly. Luckily, he created an alternative stream of revenue.

Smart Planning and a Dash of Luck

On Jan. 15, Sokač added another wing to the Run Croatia ecosystem he’s built since founding the company in 2015.

“It’s important to create a platform. The stronger the platform, the higher your immunity to crisis,” he said.

That addition was a web shop — exactly the sort of operation exempt from the restrictions put in place to fight the pandemic. Traffic to the site jumped in March, as soon as people were told to stay at home.

Suddenly, Run Croatia had a lifeline.

“It was totally by accident,” Sokač admitted.

Lopac said now that wages are off his mind for the short term, he’s trying to renegotiate deals with his financiers and landlords, using the same transparent approach he took with his employees. Early signs show promise.

“The things I am not doing: complaining, crying and waiting with hands outstretched looking for help,” he said.

But just in case, Lopac spent the better part of last week developing a promising alternative revenue model — one he’s keeping to himself.

“At this moment, OrlandoFit will be alive as long as I can keep working at the same tempo,” he said. “This will survive the same way it has over the last 30 years.”

Sometimes, the nature of the business works in one’s favor, according to the journalist Tomić.
“It’ll be hard to survive the next few months,” he said. “Thankfully, this journalism bit has strict controls on expenditures.”

The low overhead and high amount of news means Tomić’s “stay at home” lifestyle remains uptempo. He admitted to sometimes hammering away close to 17 hours a day.

“At this moment, the volume of available content hasn’t been greater,” Tomić said joylessly.

Looking Ahead with Hope

Tomić knows that this pandemic, like most calamities, will pass. The real challenge, he said, will be the recovery. A wrong turn or lackadaisical response could lead to “an economic death spiral.”

“When we come back, it can’t be at 90 percent. Or 100 percent,” he said. “It has to be at 150 percent.”

Lopac’s forecast for his company is somber: between two and three years to be back at full force. He admits fitness centers grow quiet during summer months. Many members disappear until autumn.

The bigger problem is the economic aftermath. A downturn leaves people clutching their wallets. Luxuries like personal trainers and fitness center memberships are among the first expenses discarded.

There’s also the nagging caricature of gyms as dens of bacteria and sweat.

“I know our fitness centers have the highest level of hygiene you can image,” Lopac said, spelling out the protocols and culture of cleanliness at his gyms. “I can tell you it’s cleaner than any grocery store. But the perception and thinking of the public might be different.”

Sokač, the marathon runner, admits to being an optimist. His kids, he said, are a testament to the positives this coronavirus has wrought.

“I see on this digital schooling a lot of attention is being given to physical fitness,” he said, pointing to new online courses and curriculum. “These are all changes we can keep.”

The pandemic? It’s just another challenge.

“You have people who are negative and depressive and they can’t function,” the 45-year-old said. “No matter how hard things get, you have to find something that works."

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