Sunday, 17 October 2021

Croatian State Owned Companies to be Managed by New Institution

October the 17th, 2021 - A brand new institution is set to manage Croatian state owned companies as the country edges ever closer to Eurozone accession, and the response is likely to be a very mixed bag.

As Poslovni Dnevnik/Marija Brnic writes, the establishment of a new body for the management of state property, more precisely Croatian state owned companies, is currently being prepared. This is the result of the commitments that Zagreb has accepted within the process of introducing the euro as Croatia's official currency, in order to raise the efficiency and improve the quality and operations of Croatian state owned companies.

Last week, the government appointed a steering committee to work on an Action Plan for this task, and the competent Ministry of State Property, headed by Darko Horvat, has taken its first step - launching a public debate on a preliminary assessment of the new Law on Legal Entities owned by the Republic of Croatia, which intends to bring order to corporate governance policy.

The basis will be the guidelines given to the government this summer by the OECD, which proposes the establishment of a coordination body that will monitor the activities and results of all Croatian state owned companies, meaning the placing of all enterprises under state ownership across Croatia under one ''cap'' for monitoring and management.

This new body, according to the OECD, would be of the agency type directly accountable to the government or possibly located in a ministry, provided that it isn't in charge of enacting regulations.

It sounds like a mere formality and a new accumulation of administration, which the public will hardly welcome, especially if we remember the numerous transformations that the state-owned company management system has undergone in Croatia already, from the Privatisation Fund, the State Property Management Agency to the Centre for Restructuring and Sales. and now here's a special ministry in charge of state property.

However, the OECD claims that the introduction of such a specialised body is very necessary, because the existing system, although improved in the meantime, is still not up to par in any way, shape or form. That is likely not a shock to anyone who has had dealings with one of these companies.

In short, their analysis of Croatian state owned companies and the entire corporate sector identified a number of ambiguities and shortcomings that this new “unit” will seek to address, from regulatory inconsistencies to insufficiently defined ownership policy objectives in terms of financial and non-financial expectations, and incoordination and poor communication between ministries.

The new agency should not only gain a range of powers in overseeing management standards, monitoring performance and publishing public reports of these Croatian state owned companies, but also take on an important role in appointing supervisory boards.

More specifically, it would propose candidates, which, according to the OECD's estimates, would allow for greater expertise and a shift away from politics, which is desperately needed in Croatia. There is also the possibility that the new agency will get direct ownership in state owned companies, first for a small part of the portfolio, and gradually for the entire thing.

For more, make sure to check out our politics section.

Saturday, 25 September 2021

Two Schools in Earthquake-Hit Banovina Region to Be Rebuilt With World Bank Loan

ZAGREB, 25 Sept, 2021 - Two schools in the earthquake-struck Banovina region will be built anew with the help of a World Bank loan, the Construction, Physical Planning and State Assets Ministry said in a statement on Saturday.

Minister Darko Horvat met earlier this week with visiting World Bank Country Manager for Croatia and Slovenia Jehan Arulpragasam, and the main reason for his visit was a $200 million loan Croatia was given by the World Bank for post-earthquake reconstruction and recovery in the area of Zagreb, hit by a 5.5 earthquake on 22 March 2020, and for strengthening the capacity of the public health system amid the coronavirus pandemic.

Key data on the project and its progress as well as challenges Croatia has been facing in the process of reconstruction were presented at the meeting.

The meeting also focused on Minister Horvat's proposal that the loan should also refer to the construction of two new secondary schools, in Sisak and Petrinja, towns in Sisak-Moslavina County, which was hit by a 6.2 earthquake on 29 December 2020.

Horvat said the meeting discussed the use of resources made available to Croatia to build two schools in Sisak-Moslavina County so as to create conditions for the safe and sustainable education of children in the earthquake-affected area.

Along with the reconstruction of houses and buildings, the reconstruction and construction of schools and medical facilities is one of our main priorities, the minister said.

The meeting was held as part of a five-day working visit of World Bank officials, who visited locations and facilities in Zagreb and in Sisak-Moslavina and Karlovac counties most affected by the earthquake, whose reconstruction is to be financed with the World Bank loan.

The 22 March 2020 earthquake in Zagreb and its surroundings is estimated to have caused damage to buildings in the amount of some HRK 86 billion, which is more than 60% of the state budget.

For more about Croatia, CLICK HERE.

Tuesday, 24 August 2021

Opposition MP Doesn't Believe There'll Be Anything of Zagreb Reconstruction

ZAGREB, 24 Aug, 2021 - Member of Parliament Anka Mrak-Taritaš on Tuesday said that it seems there won't be anything of Zagreb's reconstruction following the earthquake that hit the city 17 months ago and that the lack of goodwill for reconstruction is "the greatest shame of Andrej Plenković's government." 

Seventeen months after the earthquake, there is still nothing regarding Zagreb's reconstruction. There is no longer even any meetings between the government and City authorities. Damir Vanđelić, the director of the Fund for Reconstruction and Economy Minister Darko Horvat have even stopped debating in the media about who is more at fault for that," Mrak-Taritaš told a press conference on Tuesday.

As an example of what could have been done in that time, she recalled that the Empire State Building with its 102 floors was built in sixteen months' time, "and without disrupting traffic."

MP Mrak-Tartiaš warned that eight months had passed since money from the EU Solidarity Fund was paid into the government's account and "that Croatia is at risk of being the first member state to not spend that money within the set deadline and that the country might be compelled to repay it to the EU budget, while at the same time the government is using alibis why things are not being done, from the law to the programme of measures and the fund." 

The sole GLAS lawmaker believes that "it is absolutely certain now" that there won't be anything of Zagreb's reconstruction as that "requires the know-how, good management and will, yet there is none of that." She concluded that the fact that there is no will is the Plenković's government's greatest shame and sin of not doing anything."

For more about politics in Croatia, follow TCN's dedicated page.


Wednesday, 18 August 2021

Minister Says Intensive Talks Underway With Two Potential Partners for Orljava

ZAGREB, 18 Aug 2021 - Physical Planning and State Assets Minister Darko Horvat said on Wednesday that workers of the Orljava clothing manufacturer had received three wages that had been promised to them and that intensive talks were underway with two potential partners for that Požega-based company.

Commenting on statements made earlier in the day by a member of parliament Katarina Peović and New Union leader Mario Iveković, Horvat said that problems in Orljava had begun in 2012 and recalled that the government had promised to secure the payment of three overdue wages and do its best to find a strategic partner for the company.

The wages have been paid and talks are currently underway with two potential partners, Horvat said after a meeting of the inner cabinet.

The minister recalled that a major complaint by the German company Olymp, which returned its order to Orljava, was one of the reasons for the difficult situation at Orljava.

Olymp does not want to maintain its business relationship with Orljava but it does want to maintain cooperation with the Đakovo-based Hemco, and talks have been underway with that company, he said.

Hemco is interested in taking a lease on Orljava's premises and hiring back about 70 Orljava workers, Horvat said, stressing that the approach to ailing companies had changed, which was why bankruptcy proceedings were launched for Orljava on 13 July.

So far Orljava's losses have been covered by the government or from the state budget but the government no longer wants to maintain that approach. As long as there is interest in the brand and products, the government will try to have all workers hired back but it will also help find a strategic partner to invest in the company and raise production to a higher level to make its products competitive, Horvat said.

Earlier in the day, MP Peović and union leader Iveković warned about the difficult situation at Orljava, noting that the government should provide more significant support to it, considering that it was its sole owner.

Warning that on 22 July most of the remaining 172 workers were laid off, Peović said that responsibility for that rested solely with the government.

For more about politics in Croatia, follow TCN's dedicated page.

Wednesday, 18 August 2021

MP, Unionist Say Orljava Company Needs Greater Support From Government

ZAGREB, 18 Aug 2021 - The sole MP of the Workers' Front Katarina Peović and leader of the Novi Sindikat trade union, Mario Iveković, warned on Wednesday of the difficult situation at the Orljava textile company, underscoring that the government should give more substantial support to that government-owned factory.

Warning that on 22 July, most of the remaining 172 workers were laid off, Peović told a press conference that in the current situation, the responsibility lay entirely with the government, which is the 100% owner of the Požega-based Orljava textile company.

"It is unacceptable that the government failed to react when workers hadn't received a salary for three months until a protest rally was staged in St Mark's Square on 30 June," she said.

It didn't react, she warned, even when trade unions tried to speed up the resolution of the problem and enter into communication with the government, and now the ruling party seems to be on holiday and is not getting involved in the bankruptcy proceedings initiated to maintain production.

She recalled that both Prime Minister Andrej Plenković and Physical Planning and State Assets Minister Darko Horvat had been promising that the bankruptcy proceeding would be initiated primarily to maintain production.

Peović said that the Workers' Front had sent questions to Prime Minister Plenković and Minister Horvat about the situation in the Orljava company but hadn't received answers.

According to her, problems at the Orljava company started when German company Olymp, with which Orljava had had long-standing cooperation, reduced orders and then terminated them.

Also, the Olymp company wanted to know about the government's long-term plans for Orljava but received no answers, she said.

Peović also said that if Orljava's management had not been doing its job, Minister Horvat was directly responsible for that and should have replaced it.

For more about politics in Croatia, follow TCN's dedicated page.

Sunday, 16 May 2021

Is Government Planning to Sell Croatia Airlines? Darko Horvat Responds

May the 16th, 2021 - Minister Darko Horvat has come forward to answer questions about whether or not the Croatian Government has any plans up its sleeve to sell Croatia Airlines and even the well known and much loved brand Podravka.

Croatia Airlines has been knee deep in financial trouble since long before anyone had even heard of COVID-19, which, of course, has done the enfeebled domestic carrier no favours whatsoever. The ongoing pandemic is only working to deepen the airline's already gravely serious issues and it doesn't seem like Ryanair's Zagreb arrival is going to be of any assistance to what many refer to as a company which charges totally unreasonable amounts for the absolute basics in air travel.

Could a sale be on the cards for the ever-problematic Croatia Airlines? It seems that at least currently, that isn't in the works.

As Poslovni Dnevnik writes, Ministers Darko Horvat and Nina Obuljen Korzinek presented their reforms and investments as part of the much talked about Croatian National Recovery and Resilience Plan which are specifically related to the renovation of buildings and culture following the earthquake and the pandemic.

During the presentation of planned reforms in rehard to another burning issue in this country, which regards state property, Minister Darko Horvat answered the question as to whether the government plans to sell Croatia Airlines or Podravka, Media Servis reports.

"Neither this government nor I, as a minister, are considering any privatisation or sale of the Croatian share in Podravka. I'm sure, like my colleague Minister Oleg Butkovic, that Croatia Airlines either needs a quality and good strategic partner or must remain in the Croatian portfolio anyway. To lose an air traffic operator... well, I don't think it would be good or wise,'' Darko Horvat explained.

For more on the Croatian Government and state owned companies, follow our dedicated politics page.

Monday, 22 March 2021

Minister Says Organised Reconstruction in Zagreb to Start in June

ZAGREB, 22 March, 2021 - Physical Planning and Construction Minister Darko Horvat said on Sunday, ahead of the first anniversary of the 22 March 2020 earthquake in Zagreb, that preparations for the process of reconstruction were underway and that organised reconstruction would start in June.

"The process has not come to a halt. It is complex and is proceeding slowly," the minister said in an interview with Nova TV, noting that buildings damaged in the earthquake had been prepared for demolition or reconstruction.

He noted that a delay was possible if problems occurred in the procurement and appeals procedures.

"But we plan to have concrete contracts and start with organised reconstruction in June," Horvat said.

He noted that the reconstruction process would be carried out by Croatian construction companies but that foreign ones could be hired as well, depending on the dynamic of obtaining the necessary funding.

Asked if the state would cover interest on loans to be taken by citizens for reconstruction costs, Horvat said that this was being discussed with banks and that it yet remained to be seen if the state would also take over the financing of a part of the loan principal.

He recalled that staff at his ministry could help citizens write requests for reconstruction and that those requests could be submitted by mail or through the e-obnova system.

Until all contracts for the entire job of reconstruction are signed, there will be no excavators in the streets, Horvat said.

"If we want to use money approved by the European Commission fairly and in line with strict EC rules, the procedure must be followed," he said.

Thursday, 18 March 2021

Ministry of State Property's Income Exceeds Expectations Despite Crisis

March the 18th, 2021 - The state can count on far less when it comes to Croatian company profit this year when compared to 2020, but the Ministry of State Property had a far better year than could ever have been predicted given the dire circumstances.

As Marija Brnic/Poslovni Dnevnik writes, last year was marked by a state of emergency due to the ongoing coronavirus pandemic and several serious earthquakes, but the Ministry of State Property still managed to yield even better results than could have been expected.

According to the Annual Report on the Implementation of Specific Objectives and Reform Measures of the Strategic Plan for State Property Management for the Period from 2020 to 2022, recently published by the Ministry of Physical Planning, Construction and State Property, activities and financial effects in property purchase and activation are above expectations, and although things are weaker than they were back in pre-pandemic 2019, there was an extremely high level of income. That income came from the collected dividend from the operations of companies of special state interest and those from the portfolio of the Centre for Restructuring and Sales (CERP).

As a rule, Croatian company profit comes in its largest part in the form of income earned from property, after the emptying of the portfolio finally reduced the scope of privatisation processes, and last year the total profit of companies in which the state is a shareholder earned 946 million kuna.

Most of it relates to the so-called strategic companies, while 52 million kuna came from Croatian company profits that are in the CERP portfolio. One year earlier, the state collected slightly more from Croatian company profit than it did in pandemic dominated 2020 - 1.118 billion kuna.

The report doesn't provide any details on payments made by individual companies, so it isn't clear whether or not they're all included the aforementioned figures, because for example, in INA's case, the Croatian state and MOL agreed that the payment would be given to them as large shareholders to preserve business stability before January the 15th, 2021.

The payment of INA's profit, from which 279 million kuna went to the state, was made the day before the aforementioned deadline. Regardless of whether this amount is added to last year's or this year's profit income, the effect of the coronavirus pandemic and the earthquakes which rocked the country will be felt in this year's profit income, which, in the annual plan of the Ministry, for this year is projected to stand at only 360 million kuna.

The biggest failure has been recorded from the sale of shares and stakes in the Croatian company portfolio. For the last year, it is optimistically predicted that "classic privatisation" will bring with it 870 million kuna, but last year privatisation failed and brought not even a tenth of the expected amount, resulting in a mere 85 million kuna.

All revenue was generated through transactions of CERP, which sold shares in 42 companies with a total of 5 million kuna through public bidding, earning 34 million kuna through the stock exchange by selling shares in 12 companies.

Individually, the most valuable for the state was the procedure of withdrawing Badel 1862 from the registration fee on the Zagreb Stock Exchange, which earned it 38 million kuna.  It also earned 7 million kuna in the process of ousting minority shareholders in seven such cases.

Apart from natural disasters, last year's election cycle also had an effect on the functioning of property management in Croatia, when the new government was followed by a transformation of the organisation of ministries and the Ministry of State Property was annexed to the Ministry of Physical Planning and Construction.

However, the matter of dealing with the registration and activation of state-owned property under the new competent minister Darko Horvat remains in focus. The report shows that last year the number of properties under said management increased by more than 500, and the year ended with 6,723 such properties, and the total value of the lease agreement stood at 96 million kuna.

However, the real estate portfolio of the Ministry of State Property was reduced last year, so even in the conditions of the pandemic, the economic lockdown and the elections, public tenders were announced and 316 contracts on the sale of property worth more than 120 million kuna were concluded.

The Ministry of State Property also emphasised in the report that after the earthquakes that hit the City of Zagreb, and Zagreb and Krapina-Zagorje counties, a significant amount of employees were engaged in recording the situation and work related to repairing damaged buildings, but also in resolving the housing of citizens whose property was damaged during the earthquake.

The growth of the number of new lease agreements slowed down, with only seventeen being concluded, worth a total of 5 million kuna, which, in terms of reforms and property activation, is a weaker achievement, so the revenues from property management were significantly "thinner" in the end than they were back in 2019, when they amounted to 210 million kuna. In 2020, that figure was 155 million kuna less.

One of the most important models of activating state property last year lay in donations for various projects, and a total of 62 such contracts were concluded last year for property worth 402 million kuna. A significant number of them relate to infrastructure projects, as well as business incubators and waste management projects.

The most valuable donated property is part of the former Dracevac barracks (with a price tag of 138 million kuna) which was handed over to the City of Split for the construction of the Technology Park and Traffic Centre, and among other things, land worth 49 million kuna on which Novalja will build the ZaglavaProzor business zone, as well as donated land and eight office buildings which were given to the municipality of Marija Bistrica for the construction of an entrepreneurial zone.

The report also looks into unplanned leasing for the use of such property, including temporary accommodation until the consequences of the earthquake are remedied, and by the end of the year, five properties were listed in this category.

From the report on the implementation of the planned reform measures and the improvement of the Ministry of State Property's management system, one of the novelties that has just been mentioned is the establishment of the Register of Inactive Assets of State-Owned Enterprises.

All that has been stated is that a report has been put together with recommendations for the identification of non-operating assets in strategic and majority-owned companies, but without many details, while the new annual state property management plan for 2021, which recently passed public discussion, brings with it another novelty in the form of asset management - the establishment of an early warning system, which will ensure a timely response to possible instabilities in the operations of state-owned enterprises.

For more, follow our business section.

Saturday, 6 March 2021

eReconstruction System Begins Operations in Post-Earthquake Petrinja

March the 6th, 2021 - The eReconstruction system is now in operation in earthquake-stricken Sisak-Moslavina County in central Croatia, aiming to make administrative processes for those who need construction services more easily accessible.

As Poslovni Dnevnik/Marija Crnjak writes, Minister of Construction Darko Horvat recently presented a new system for the electronic submission of requests for the reconstruction of earthquake-damaged buildings - the innovative new eReconstruction system. Croatia´s eReconstruction system has otherwise been in operation for a couple of days now, and the minister has emphasised the fact that it will speed up the process of submitting and receiving applications.

"In cooperation with the company APIS IT, we created the eReconstruction system in order to make the process of applying for renovation/reconstruction following the earthquake as easy as possible for our affected residents and to offer them several different opportunities for this purpose," explained Horvat.

Easy access to the application for all natural and legal persons is provided through the e-Citizens (e-Gradjani) system, and a level three credential will be sufficient for entry via NIAS.

The Minister revealed that the doors of the Reconstruction Information Centre will also open in the centre of Zagreb by March the 15th, which will house officials of the Ministry, the Reconstruction Fund and the Central State Office for Reconstruction and Housing, as well as employees of the Legal Clinic.

People will be able to get their hands on all of the necessary information and advice there, and they will also be able to submit requests for property reconstruction.

"We want to continue to be here, present on the ground as much as possible, so that we can make the procedures for submitting applications for reconstruction as simple as possible. Our focus now is on issuing the first decisions on reconstruction, so that they are sent to the Fund and the Central State Office for operationalisation and the beginning of the organisation of reconstruction, " concluded Minister Darko Horvat.

For more on the Petrinja earthquake, follow our dedicated section.

Sunday, 17 January 2021

Horvat: State Will Fully Finance Post-Quake Reconstruction in Assisted Areas

ZAGREB, 17 January, 2021 - The state will fully finance the reconstruction or construction of buildings in assisted areas affected by the earthquake, Construction Minister Darko Horvat said on Sunday, adding that whether citizens would cover 20% of the costs would depend on their income threshold.

Horvat told the press a bill on post-quake reconstruction said that Sisak-Moslavina County would co-finance 20% of those costs. If the county will not be able to pay that amount, the state will do so, he added.

As for buildings and houses that have been demolished and will not be reconstructed, the state will fully finance the construction of new ones, he said.

On Thursday, the government sent to parliament a bill of amendments to the law on the reconstruction of buildings in the City of Zagreb and Krapina-Zagorje and Zagreb counties damaged in a March 2020 earthquake, proposing that the law also apply to Sisak-Moslavina and Karlovac counties, which were struck by a devastating quake in December.

Under the bill, those counties will set aside 20% in their budgets for reconstruction, as will property owners. In assisted areas where a state of disaster was declared, the entire cost will be covered by the state, in line with a special regulation.

A property owner is exempt from covering 20% of the reconstruction costs if their household income in the previous and the current year does not exceed the non-taxable income amount, if they had no other assets on 22 March 2020 whose value exceeded HRK 200,000, and if they receive welfare benefits.

Horvat said the bill was clear and that it included the income threshold, so pensioners and people out of work need not fear.

He said that in assisted areas where a state of disaster was declared, the government would fully cover the construction of new homes.

Everything in the bill also applies to the City of Sisak, Horvat said, commenting on Mayor Kristina Ikić Baniček's statement yesterday that "Sisak will be reconstructed under the same model as Zagreb" which, she added, her city could not afford.

Horvat said that under the bill, Sisak would not have to pay anything for the reconstruction, adding that 80% of the reconstruction amount had already been ensured without the city paying anything.

He said the residents of Sisak who had a second or third property outside the city "whose value exceeds certain amounts" would have to pay for 20% of any reconstruction costs.

"The government has not nor will it leave anyone in the lurch," Horvat said, adding that the state would fully cover a replacement home for all people whose homes have been demolished and which will not be livable.

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