Wednesday, 12 May 2021

Croatian Recovery Plan Focusing on Modernisation of Ports, Trams, Ships

May the 12th, 2021 - The Croatian Recovery Plan is going to place a focus on modernising trams, ports, vessels, catamarans and more.

As Poslovni Dnevnik/Darko Bicak writes, the Croatian Recovery and Resilience Plan (NPOO) is worth a total of 47 billion kuna, it has five components, of which a massive 26.2 billion kuna will flood back into the domestic economy. It also includes the development of a competitive, energy-sustainable and efficient transport system, for which 5.5 billion kuna is planned.

The plan, as pointed out by the Minister of Maritime Affairs, Transport and Infrastructure, Oleg Butkovic, who presented the transport part of the Croatian Recovery Plan at the weekend at the Port of Rijeka, envisages the continuation of significant investments in modernisation of transport infrastructure with the aim of developing sustainable transport and encouraging smart solutions. reforms of the railways, road and air sectors, as well as the reform of maritime and inland waterways.

"We're ready to go ahead with all of these reforms, to implement all of these projects, and this is an opportunity to continue this strong investment cycle in transport infrastructure, which today amounts to a little more than 25 billion kuna. With the resilience programme, we're continuing on with a strong investment cycle which, by 2030, when we add it all up, will be worth more than 30 billion kuna, mostly for the railways, as well as for all other projects,'' said Butkovic.

He added that the construction or reconstruction of Croatia's railway infrastructure, the modernisation of seaports, the procurement of three new passenger ships and three catamarans, as well as brand new ferries, trams, buses, new photovoltaic power plants and more.

Butkovic also announced that through the implementation of these reforms until 2026, amendments to the Road Act will also be adopted, which will create the proper conditions for the interoperability of electronic toll collection systems and increase overall road safety.

Namely, one of the most anticipated projects is the establishment of a new electronic toll collection system. Butkovic said that Hrvatske autoceste/Croatian motorways (HAC) is now in a very serious phase of launching a tender for a new contactless toll collection system on all sections of the country's motorways.

For more on the Croatian Recovery Plan, follow our politics page.

Saturday, 8 May 2021

Proposal for 77 Croatian Reforms and 152 Investments Heading for Brussels

May the 8th, 2021 - The plan for many different Croatian reforms and investments, packaged as the Croatian Recovery and Resilience Plan, is on its way to the European Commission's door in the Belgian capital.

As Poslovni Dnevnik/Ana Blaskovic writes, the Croatian Recovery and Resilience Plan, the key to an enormous 49 billion kuna intervention injection, has been completed and it is time to send it to Brussels, with a final agreement set to take another ten days. The more than 1,100 pages list 77 Croatian reforms and 152 investments that the Government, with the practical absence of public debate, envisioned as a springboard for recovery from the ongoing coronavirus crisis and the transformation of the domestic economy.

Finance Minister Zdravko Maric stated that the focus was on grants and that the core of the document was Croatian reforms and both public and private investments. The plan is designed for five components and one initiative - 26.2 billion of the total amount (54 percent) should be poured into the economy, 4.36 billion (10 percent) into public administration, judiciary and state property, education, science and research should get an injection of 7 .5 billion (15 percent). Then, for the labour market and social protection, another 2.09 billion (4 percent), for the healthcare system 2.56 billion (5 percent of the amount). A large amount of these funds, 5.95 million, is intended for building renovation initiatives.

GDP growth

The effect of this Croatian plan this year should be reflected in 5.2 percent of real GDP growth, which would have stopped at 4.9 percent without it. Next year, growth is expected to reach 6.6 percent instead of what would have been 5.2 percent without such a plan, in 2023 it should reach 4.1 percent instead of 2.7 percent. In 2024, Croatia's GDP should grow by 3.4 percent instead of 2.5 percent, and in 2025 by 2.7 percent instead of 2.5. It should be noted that the predictions of the acceleration of the economic momentum are based on the (rather optimistic) assumption of a successful withdrawal of this money, although Croatia has so far withdrawn less than half of the total funds available to it.

Brussels has already warned that payments will be conditional on the fulfillment of very specific goals, if a member state fails there is a (theoretical) possibility of payment at the discretion of the EC, which, despite the offer, should not be counted on.

About two thirds of the funds will go directly to investments, and one third to desperately needed Croatian reforms. What the funds won't and cannot be used for is "patching up any holes", such as resolving debts in the healthcare sector. The government has begun work on a rebalance in that regard which is planned for early June.

"The purpose of implementing Croatian reforms is to influence the better use of factors of production, those that create added value," Maric added. In particular, education reform would improve the quality of human capital by including children in occupations where there are needs in the labour market. In the judiciary system, reforms will be aimed at greater efficiency and the faster resolution of cases in order to improve the business climate. Referring to the segment of state property, Maric pointed out that many companies are owned by the state. From his words, one can read the good news for the stock market is because “activation can directly contribute to the revival of the capital market”.

Looking ahead...

After the European Commission gives its consent over the next two months, the draft plan will be sent to the European Council, and by the autumn, Croatia could receive a six billion kuna advance (13 percent). Implementation begins at the end of the year.

Commenting on the criticism that insufficient funds are directed to the private sector, which should be the engine of recovery and job creation, Maric reiterated: ''There's no need to divide investments into the public and private sectors because public investments also mean the participation of the private sector. The greatest value of the document is looking ahead, as resilience in the long run means implementing 77 Croatian reforms.''

For more, follow our politics section.

Saturday, 1 May 2021

Croatian Recovery Plan to Significantly Beef Up GDP by 2026

May the 1st, 2021 - How can the Croatian recovery plan add to the country's GDP by the year 2026? With the ongoing coronavirus dealing blow after blow, help from the European Union's special mechanism could be the rescue package the Croatian economy needs.

As Poslovni Dnevnik/Jadranka Dozan writes, in order to use the 47 billion kuna in grants from the EU's Recovery and Resilience Mechanism over the next five or six years, the Croatian Government prepared a National Recovery and Resilience Plan (NPO) for final consultations with the European Commission with 152 investment projects and 77 reforms on the table.

Prime Minister Andrej Plenkovic repeatedly emphasised recently that this is a proposal for the Croatian recovery plan, which means that through the process of intensive consultations over the coming weeks, certain modifications are possible and even likely to an extent. This large document, containing more than 1,100 pages, explains the planned reforms and investment projects for which the intention is to obtain 6.4 billion euros in so-called grants. The Prime Minister describes this as key to Croatian economic recovery, increasing resilience to future crises, and overall development in the coming years.

In addition to the positive effects of such investment incentives for domestic economic growth, the reforms required of EU member states under this particular EU instrument should result in the strengthening of institutions and competitiveness. In a year or two, Croatia can go with projects for which it would seek favourable loans as part of the second component of the EU Resilience Fund, and for which Croatia has an additional 3.6 billion euros or about 27 billion kuna at its disposal. All of that is currently sitting on the shelf and is very much in the background at the moment, however.

In addition to the proposal for the Croatian recovery plan, the government will forward the Convergence Programme to the European Commission in a package, which is usually sent to Brussels at this time of year as part of the European Semester. That document also has a strong NPOO stamp. Since the first 6.1 billion kuna is expected to be pre-financed under the Croatian recovery plan at the beginning of autumn, the government estimates that its first effects on economic growth will be seen in Croatia's growth rate in 2021, and much more in the coming years.

Namely, according to new macroeconomic projections, domestic GDP growth of 5.2 percent is expected this year, with 0.3 percentage points of growth attributed directly to the effect of the Croatian recovery plan. Over the next two years, this effect should be around 1.4 percentage points of growth, meaning that next year it is expected to grow by 6.6 percent instead of 5.2 percent.

The Ministry of Finance has calculated that by 2025, compared to 2020, the implementation of the Croatian recovery plan will cumulatively increase GDP by an additional 4.2 percent when compared to the scenario without the use of the Croatian recovery plan. Finally, in 2026, as the last year of the implementation of the plan, Croatian GDP should be 17 billion kuna higher than it would have been without the Croatian recovery plan in place.

For more, follow our dedicated politics section.

Thursday, 22 April 2021

Croatian Recovery and Resilience Programme Faces More Criticism

April the 22nd, 2021 - The Croatian Recovery and Resilience Programme is continuing to face more backlash, doubt and criticism as this so-called ''generational opportunity'' presents more questions than it does answers.

As Poslovni Dnevnik/Ana Blaskovic writes, not even ten days before being sent to Brussels, criticism of the Croatian Recovery and Resilience Programme, the key to the 6.3 billion euro grant to try to drag us up and out of the ongoing pandemic crisis, hasn't stopped.

Those to whom it should refer didn't participate in the programme's creation, only about eighty pages of the summary were released to the public and it included projects that have nothing to do with reforms.

Disappointment with the plan, which the prime minister calls a "generational opportunity", is shared by the Croatian Employers' Association (HUP), who demand that the document be changed in such a way as to direct more money to the real sector.

At a recently held conference, which dissected the plan with the specific question of what kind of investments can get us out of the crisis, chief economist Iva Tomic pointed out that in terms of GDP per capita, Croatia is at the very bottom of the EU, at 65 percent of the European Union average.

If we want to get closer to 75 percent then we need to grow faster than others in as much as is possible by boosting merchandise exports and private investments with a quick return, rather than repeating the mistake we made back in 2008 when public investment and infrastructure were favoured.

''We need bold growth rates’'

"The patient is now in the terminal phase, and we're treating him with aspirin, so in five years we'll be sitting, scratching our heads and again wondering why we're lagging behind. We need bolder growth rates, and we can only achieve that by direct investments in entrepreneurship,'' HUP's Igor Skrgatic, from the company BE-ON, stated.

"I really don't understand how we can allocate 7.5 billion kuna for the renovation of buildings and facades, and only 2.5 billion kuna for healthcare, which is less than a dozen annual investments in the sector," asked HUP president and Pliva's main man, Mihael Furjan. He noted that productivity must be increased, but "we don't see how the plan is planned to be used in the right way, in order to increase efficiency."

He added that investments in equipment are welcomed because in healthcare it can increase disease prevention and bring savings, but that it should be used to the maximum with accompanying investments in people. “In healthcare, we have great doctors and pockets of excellence. For example, efficiency already exists in dental tourism and transplant medicine,'' Furjan pointed out, highlighting brighter Croatian examples.

Skrgatic emphasised that there is too much allocation in the public sector already, which doesn't have the capacity to absorb money in the short term, instead of in the private sector, where one kuna of investment would create a new 3-4 kuna. "There is a thesis that we're asking for helicopter money. No, we're asking for money for projects in a high stage of development, to make programmes in accordance with the pillars of the EC, to which entrepreneurs will apply,'' said Skrgatic.

Mislav Balkovic, the Dean of the Algebra University College, believes that the Croatian Recovery and Resilience Programme and its plan shouldn't be viewed only from the perspective of cash but also the creation of jobs. He stated that education is the foundation of competitiveness, and Croatia is in the company of the Philippines and Costa Rica in this regard, which isn't much to shout about.

"Investments in infrastructure aren't going to work to create new jobs, and we aren't going to be able to maintain the existing system of intergenerational solidarity for long. Key reforms must emerge. That's why it's much better for the changes to be designed after the local elections when the pressure for investments in local infrastructure is reduced,'' said Balkovic.

The age old Croatian mentality of helplessness

“The Rimac Campus and the Sisak Refinery are very potent projects. But why don’t we have 200 projects in the catalog? We can't even get anywhere close to that if the person compiling the catalog doesn't come and talk to us,'' stated Atlantic Group CEO Emil Tedeschi.

He pointed out that he opposes the stereotyping that projects are divided into the private and public sectors, but that it's important to see how to allocate money to create a multiplier effect. He also pointed his arrow to the address of the private sector and discussed the role, or lack of, of the state in that field.

"If Infobip had waited for the Government, it wouldn't have become a unicorn, if Rimac had waited, he wouldn't have attracted investments from Porsche and Hyundai"

We've unfortunately got a mentality which is a combination of rentiership and helplessness, and there's still an awful lot of work which needs to be done. But that doesn't simply get the Croatian Government out of its duties of taking some responsibility,'' Emil Tedeschi concluded when discussing the Croatian Recovery and Resilience Programme and its content.

For more, make sure to follow our dedicated business section.