Sunday, 3 January 2021

Should EU Cash go to Croatian Private Sector for Investment Purposes?

Thanks to a good pre-crisis initial capitalisation, Croatia's banks have enough potential to continue to provide all the services they have provided so far, but should future EU cash injections go to the Croatian private sector for investments?

As Poslovni Dnevnik writes on the 3rd of January, 2021, although the second wave of the ongoing coronavirus pandemic is now at its peak, announcements of an effective vaccine and the expected natural calming down of the spread of infection with the arrival of spring 2021 gives us hope that all of those promises of domestic economic recovery will come true. At the same time, what's more important than that growth itself is what the quality of the recovery will be, how long it will last for, and for those at HUB, the most important thing is to analyse what the role of banks could be in that saga.

Owing to a good pre-crisis initial capitalisation, banks have enough potential to continue to provide all the services they have provided so far. This potential can be applied equally to liquidity and available capital. Good projects, as well as the needs of people who will regularly repay their obligations will be financed at the lowest interest rates in Croatia's history. How can we ensure that the start of Croatia's economic recovery in 2021 and the availability of funds at a very low cost of capital turn into lasting recovery at high growth rates? The answer depends on how the country uses European Union (EU) funds.

It is of the utmost importance to use those funds so that as much as possible falls into the hands of the Croatian private sector, more precisely the corporate sector, in order to increase investment. Banks are ready to support such projects, because investments accompanied by favourable financial structuring strengthen the sense of trust in clients and this improves their creditworthiness in general in the long run.

An important part of European Union funds is that which is used for various financial instruments. This is of great importance when it comes to the very structure financial instruments so that they don't crowd out the market but instead complement and improve it, in two ways. First of all, the improvement of the framework for resolving insolvency and the development of capital markets, especially venture capital funds, is imposed as a necessity to increase the economic dynamics on the way out of this terrible and unprecedented crisis. It is good that these measures are mentioned in the National Development Strategy 2030 and are in the recommendations of the EU Council to Croatia, so the implementation of these measures can now be readily expected.

Second of all, when it comes to debt instruments, the trend of sectoral and earmarked fragmentation of credit guarantee schemes needs to be reversed. The guarantee schemes of HBOR and HAMAG-BICRO, which are financed from EU funds, should be simplified, reduced in their numbers and made more flexible and transparent according to the needs of the market. This will encourage risk-taking that wouldn't have been taken without government intervention, which directly increases investment and economic growth.

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Wednesday, 30 December 2020

Croatian Company Podravka Gets EU Cash, Sees Potential in Certain Area

December the 30th, 2020 - Podravka is as well known to every Croat as the dangers of propuh and arguments over what real burek are. Thanks to EU cash, the much loved Croatian company Podravka has its sights on one area in particular.

As Marija Crnjak/Poslovni Dnevnik writes, for the project of developing innovative by-products during vegetable processing, worth a little less than seven million kuna, the Croatian compan Podravka was approved three million euros in non-refundable funds from the European Regional Development Fund. This is the first research project of the Koprivnica-based food company that will be financed from European Union funds.

As the Croatian company Podravka explains, during the two years of its implementation, an innovative, technologically efficient process of separating nutritionally valuable biowaste from the industrial vegetable processing of Podravka's Kalnik Factory in Varazdin will be looked into for the development of new and innovative food products.

The potential for biogas production from all waste production streams will also be further investigated, and the expected results of this project are the creation of new knowledge and the increase of Podravka's intangible assets through patents and yet more new brands, increasing the efficiency of the production process through the commercialisation of innovative products.

A few years ago, Podravka started analysing the condition and potential of by-products that arise during production in its factories, especially in the Kalnik and Umag plants.

As explained from the company, the research and development sector of Podravka in that period in cooperation with the academic community set hypotheses based on previously published scientific papers, and preliminary tests determined the existence of the nutritional potential of vegetable by-products that could focus on the development of completely new products and added value.

Since additional larger-scale research was needed for stronger evidence to back that up, back in February 2020, the Croatian company Podravka applied for EU funds through this project.

"I believe that the comprehensiveness of the project's goals, which touch on as many as three thematic priority areas of the Smart Specialisation Strategy of the Republic of Croatia (Food and Bioeconomy, Energy and Sustainable Environment and Health and Quality of Life), has greatly contributed to this rapid positive result.

We're extremely proud of this project, which is the result of cooperation between different sectors within the company, management, associates and consultants,'' said Jasmina Ranilovic, the project manager and the director of Research and Development at Podravka.

The recently presented project for the development of innovative products from the category of food for special medical needs is being co-financed from EU funds, which together included the Rudjer Boskovic Institute (RBI) and the pharmaceutical company Belupo. The value of the joint research and development project stands at an impressive nine million kuna, of which 6.1 million kuna was co-financed with European Union money.

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Tuesday, 20 October 2020

Numerous Croatian Cities Chase Best EU Fund Withdrawal Title

As Novac/Vedran Marjanovic writes on the 19th of October, 2020, unlike last year, when the three best Croatian cities in regard to EU fund withdrawal were chosen within the selection of Jutarnji list, the portal and the Ipsos agency, in this year's selection of awards in this category, there will only be the one single Croatian city, and Krizevci, Rijeka, Virovitica, Zagreb and Zadar are in the competition.

In support of the candidacy for the best Croatian city in terms of EU fund withdrawal, Rijeka submitted five projects for which the European Union provided co-financing in the handsome amount of 210 million kuna. The most financially demanding among them are the projects of the revitalisation of the Bencic complex (122.7 million kuna, of which the EU co-financed 68.2 million kuna) and the tourist valorisation of the representative monuments of Rijeka's industrial heritage, with a total value of 81 million kuna, with non-refundable EU funds making up 68.8 million kuna of that figure.

''For the project of inclusion, ie the inclusion and integration of students with disabilities in regular schools, 8.3 million kuna has been provided from the European Social Fund to finance 57 teaching assistants,'' the Rijeka City Administration stated.

The people of Krizevci have already won this category of the best cities on two occasions in the past, and they are in the race to take the title for the third time with eight projects worth a total of 54 million kuna in total, which include co-financing from EU funds. The largest share of co-financing from EU funds, 85 percent, was provided to Krizevci for the Healing Places project which involved spas in cities, worth 15.5 million kuna.

''The EU Rural Development Programme has provided co-financing of six million kuna for the reconstruction of the social home in Carevdar, and the total value of the project is 7.4 million kuna,'' they pointed out from the city administration of Krizevci.

The Dalmatian city of Zadar is also in the race to take the EU fund withdrawal title, and the total value of four infrastructure projects that Zadar is developing with the financial support of the EU stand at 167 million kuna in total. These include projects for the implementation of smart transport solutions (with a total value of 14.8 million kuna), the reconstruction of roads with proper bicycle paths (35 million kuna) and the reconstruction of a youth centre worth close to 40 million kuna.

''The Youth Centre is a 'brownfield' investment in the very centre of the city in order to revitalise the currently unused facility,'' they announced the Zadar City Administration.

The reconstruction of the roundabout located at the southern approach of the city, for which Zagreb was generously provided 272.8 million kuna from the EU, is one of four major projects attached to the capital's candidacy for victory in the EU fund withdrawal category. There is also an investment with the help of EU funds for the purchase of 29 city buses which conform to the appropriate environmental standards worth 55.8 million kuna, which the Union will co-finance in the maximum of 85 percent.

''The project's technical documentation for the implementation of energy renovation and the use of renewable energy sources in 25 public sector buildings such as schools, kindergartens and health centres is underway, marking a total investment of 229 million kuna, of which 103.4 million kuna was co-financed by the European Regional Development Fund,'' they point out in the Zagreb City Administration. Zagreb will withdraw a total of 480 million kuna from EU funds for projects submitted with the candidacy in this competition.

Virovitica also entered the finals of the selection of the best city when it comes to EU fund withdrawal with five projects worth a total of 113 million kuna. The most valuable among them is the project of the integrated development programme of Virovitica called ''5 to 12 for the castle'', which refers to the comprehensive renovation of the Pejacevic castle in an investment of 82 million kuna.

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Saturday, 26 September 2020

Can Croatian Government Afford to Spend More Thanks to EU Cash?

As Novac writes on the 25th of September, 2020, in addition to Croatian economic recovery, the withdrawal of money from European Union funds, including the new New Generation instrument, will have a decisive impact on budget movements, not only next year, but throughout the projected period until 2023. Will EU cash be the saviour in this crisis situation? Probably.

The total budget revenues, as stated in the guidelines for drafting the budget presented by the Minister of Finance Zdravko Maric, will amount to 147.1 billion kuna next year, which is 25 billion kuna more than this year. Compared to back in 2019, they increased by seven billion kuna. Revenues from aid are growing the most, and they're mostly related to EU cash: they will amount to 25.1 billion kuna, 7 billion kuna more than this year, and compared to 2019, they will increase by as much as 10.3 billion kuna. Of the other revenues, the level from last year, also known as the pre-crisis year, should almost reach the revenues from the VAT, with a growth of 23.9 percent and will amount to 54.1 billion kuna, only 700 million kuna less than last year.

Mainly due to the increased withdrawal of money from EU funds and the availability of that EU cash, the Croatian Government will be able to afford an increase in expenditures of 10.4 billion kuna (7.1 percent), so it will amount to a total of 157.6 billion kuna. Expenditures for material things will grow the most, by 16.6 percent or 2.3 billion kuna, and most of this increase will be financed from EU cash. For these needs, 9.1 billion kuna will be withdrawn, 1.8 billion kuna more than this year, and it will be used for "repairing the damage caused by the Zagreb earthquake and on material expenditures in state-owned health care institutions", as well as on other projects and activities within the Competitiveness and Cohesion Operational Programme.

Another important expense for the state budget is the compensation of revenues to local units due to the reduction of income tax. The government has earmarked 2.2 billion kuna for this purpose. A total of 33.6 billion kuna will be spent on budget aid next year, which is 6.5 billion kuna more than this year. In addition to assistance to local units, this increase includes additional allocations for contributions to the EU budget, then equalisation funds for decentralised county functions, as well as expenditures for employees, and it will increase by 377.7 million kuna when compared to 2020.

When it comes to staff expenditures, the government is clearly counting on successful negotiations with the unions. These expenditures are planned in the amount of 23.6 billion kuna, which is 1.3 billion kuna more than this year.

Expenditures for pensions, as a result of regular adjustment, will increase by 1.2 billion kuna, and social assistance funds will increase by 407.5 million kuna.

Having in mind the experience from the past few years, which shows that the withdrawal of EU cash is significantly less than planned in the end, the question arises as to how realistic it is to expect that the government will manage to achieve these rather ambitious announcements in 2021. Danijel Nestic from the Institute of Economics says that there is indeed a systemic problem in budget planning and that revenues from European Union funds are constantly overestimated.

''As these revenues are lower than planned in the end, the expenditures for which they're planned are also reduced. This doesn't affect the increase of the deficit, which is certainly very important for the Ministry of Finance, but the fact is that better planning is necessary in case of withdrawal of EU cash,'' explained Nestic, adding that he isn't ruling out the possibility that the planning for such things has been improved.

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Thursday, 13 August 2020

Could Green Energy on Croatian Islands Become EU Funds Magnet?

As Poslovni Dnevnik/Darko Bicak writes on the 12th of August, 2020, when it comes to dealing with the particular needs of people living on Croatian islands, as well as the development of island economies, things can become very challenging. Apart from the obvious issue being the continual connection to the mainland, the biggest problem of all those living in Croatian islands is the infrastructure, and especially the flow of electricity.

That is why in recent decades, great efforts have been made across Europe to make the bloc's islands as energy-efficient as possible through the development of green energy.

With the entry into the EU, this has also been being carried out across Croatia's many inhabited islands. As such, the continued development of renewable energy sources on Croatian islands has gained new momentum, which is contributed by the fact that Croatian MEP Tonino Picula is the president of the parliamentary Intergroup for Seas, Rivers, Islands and Coastal Areas in his second term. He boasted that his lobbying had secured around four million euros in the new EU budget for the energy transition of Croatian islands.

"We've successfully pulled the islands out of political anonymity in Europe and imposed them as the engine of energy transition. The islanders are the most heavily called upon to manage the development of their islands and that is why I'm in favour of a long-term and lasting EU island strategy as the main instrument of support to the islanders,'' Picula pointed out.

The “The Future of the Energy Transition of the Island of Hvar” conference was recently held on the island of Hvar, when the strategic partnership between the Island Movement (Pokret otoka) and the Renewable Energy Sources Association of Croatia (OIEH) should be signed. This is to make the best possible use of money from EU funds and their Green Plan project. As Maja Pokrovac, Director of OIEH, explained, the EU has offered a plan for recovery from the coronavirus pandemic worth a massive 750 billion euros, of which at least 30 percent must be spent on climate protection and the reduction of greenhouse gas emissions.

"EU member states must prepare their recovery plans within their national programmes, which should include investment and reform priorities, and submit them by April 2021. In its plan, Croatia should focus on activities that can start the economy up again, on a sustainable basis, and have it be closer to carbon neutrality,'' she said, adding that the energy transition of Croatian islands is one such activity.

"With this agreement with Hvar, we want to ensure the timely information and preparation of projects ready for financing in the areas of Croatian islands and to advocate for the well-being of island communities and their participation within these development projects. Therefore, we'll cooperate across all areas of common interest, including the development of RES on the islands, and especially on energy project development activities, the preparation of project studies, community involvement, strategic planning and consulting the Island Movement in the field of energy, information and education. The transition to clean energy sources can help Croatian islands become self-sufficient and open new employment opportunities for people living on them,'' said Pokrovac.

However, she added that the entire population, representatives of local and regional self-governments and entrepreneurs, civic initiatives and cooperatives, educational institutions must all be involved in the implementation process.

As many as ten Croatian islands: Cres, Ilovik, Lošinj, Male and Velike Srakane, Susak, Unije, Brac, Hvar and Korcula are currently implementing projects to prepare for the transition to clean energy.

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Wednesday, 29 July 2020

PM: EU Funds Will Be for Rural Development, Demography, Agriculture

ZAGREB, July 29, 2020 - Prime Minister Andrej Plenkovic boasted in parliament on Wednesday about the €22 billion Croatia will have at its disposal from the EU budget in the next seven years for, he said, the development of counties, agriculture, rural development, and demographic revitalisation.

MP Hrvoje Zekanovic of the Hrast party asked where the EU would find the money.

"Regarding the Next Generation EU instrument, to help member states in an unprecedented situation, when everyone's GDP is falling, the European Union will borrow on markets where there is money under the most favourable terms, money which practically doesn't cost anything and which will be paid out over the next 30 years," said Plenkovic.

Responding to MPs' comments, he said there would be money also for fishermen, local projects, and balanced regional development.

My goal was to get as much money for the national envelope as possible while compromising on programmes which apply to all and where fund absorption will depend on the activity of the stakeholders in Croatia, Plenkovic told Romana Nikolic of the Social Democratic Party (SDP), who asked about the slashing of initially envisaged funds for Horizon 2020, Invest EU and health, defence and migration policies.

The prime minister disagreed with Katarina Peovic of the Workers Front that there was no solidarity, convergence or cohesion. Cohesion was achieved by the decision that the EU seeks funds for the member states among investors and on financial markets, he said.

Plenkovic dismissed Ranko Ostojic's (SDP) claim that Croatia fell short as the chair of the Council of the EU in the first half of the year, saying it was praised and thanked as well as achieving results.

Domagoj Hajdukovic (SDP) asked about Croatia's stand on making the absorption of European budget funds conditional on the rule of law. Plenkovic said Croatia was "for it" and that he did not fear a report on the rule of law in Croatia.

"You don't know much about the EU," Plenkovic told Nikola Grmoja of the Bridge party.

Nino Raspudic (Bridge) said it was a paradox that the fact that Croatia needed so much EU aid was also its biggest failure.

Tuesday, 28 July 2020

Pazin First Town in Istria to Have Reclaimed Its Landfills

ZAGREB, July 28, 2020 - Pazin Mayor Renato Krulcic said on Tuesday that Pazin was the first town in Istria County to have rehabilitated and reclaimed its landfills.

Addressing a news conference, Krulcic said that local government had invested HRK 28 million of local budget money and EU funds in sustainable waste management in the last five years.

He went to say that a transfer station and a recycling yard have been built and a mobile recycling yard has been purchased for this town with a population of about 8,600.

Thursday, 28 May 2020

New EU Reconstruction Fund Could Benefit Croatia Amid Coronavirus Crisis

The coronavirus crisis has seen an array of consequences be played out with the European economy and the individual economies within it. With some countries, particularly those who rely more heavily on tourism, struggling to see the light at the end of the tunnel and biting their nails. The EU Reconstruction Fund could see the bloc step into a new era.

As Poslovni Dnevnik writes on the 28th of May, 2020, the new EU Reconstruction Fund is a big step forward for the whole of the EU because for the first time, mass borrowing has been proposed at the level of all of the Union's member states.

Following the coronavirus crisis, the Republic of Croatia should be one of the biggest ''winners'' of the new EU Reconstruction Fund, which is worth as much as 750 billion euros, and which was officially presented by the European Commission (EC) in Brussels yesterday.

As Vecernji list has unofficially learned, 10 billion euros could allegedly be allocated to Croatia from the EU Reconstruction Fund, which represents a huge step forward in the development of the entire European Union, and according to a table from extensive European Commission documents, Croatia's allocation would be the largest when compared to total GDP per country to which the money goes.

The EU Reconstruction Fund marks a new ero of sorts for the whole of the EU because for the first time in its history, mass borrowing has been readily proposed at the level of all of the Union's member states, contrary to the current practice of borrowing exclusively at national levels, and as such, the European Commission would distribute the money in the form of grants provided to those who have been most affected by the crisis caused by the global coronavirus pandemic.

More precisely, the European Commission's proposal is to distribute a massive 500 billion euros in the form of non-refundable money, and 250 billion euros in the form of loans, which will be the most favourable possible loans on the market for countries like Croatia because the EU enjoys a top credit rating of AAA, which is something that Croatia can unfortunately otherwise only dream of.

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Wednesday, 27 May 2020

EU Money for Zadar Business Zone and Intelligent Transport System

In addition to EU cash for the Zadar business zone and an intelligent transport system, the University of Zadar also received a grant for the project of renovating the old Technical School.

As Poslovni Dnevnik writes on the 25th of May, 2020 on Monday, Prime Minister Andrej Plenković presented the mayor of Zadar, Branko Dukić, with four contracts for European Union projects worth a massive 135 million kuna in total, and pointed out that the City of Zadar has proven to be one of the most efficient in terms of using EU funds.

This is a grant for the project of building the infrastructure of the Zadar business zone (to be called Black/Crno) in its first phase, and for the projection, development and implementation of an intelligent transport system and reconstruction of the road in the city. As touched on above, the University of Zadar also received a grant.

Plenković mentioned that during the mandate of this Government, 2.6 billion kuna in EU projects have been agreed for Zadar and the wider Zadar County. He added that ITU mechanisms have provided as much as 345 million euros at the Croatian level, and pointed out that the City of Zadar has shown the highest degree of efficiency in its subsequent use of European Union funds.

"With these four projects we've signed, we have covered all of the most important areas, transport, which raises the quality of life of residents, education, because the City of Zadar, in addition to being an important trade and tourism giant, is also an important university and education centre," said the Prime Minister.

He added that the agreements also cover the field of culture, which is especially important, since Zadar is one of Croatia's most important historical cities, and entrepreneurship with the Zadar business zone has also been covered by the funds.

"Through all of these four aspects, these contracts worth 135 million kuna, of which 106 million are non-refundable, will contribute to the development of the city and the county," he said.

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Saturday, 25 April 2020

Croatian Agrobiz Misusing Some EU Organic Farming Funds

April 25, 2020 — Croatia's farming sector turned into a circular firing squad on Saturday after a leader in the Chamber of Agriculture claimed the nation's farmers owed the EU eye-watering sums of misused funds. The Agricultural Ministry later denied all allegations, while admitting some "irregularities" existed in EU-back funding for organic farming which were quickly weeded out.

The accusations by Chamber of Agriculture Vice President Antun Vrankić first appeared in a Vecernji List article about the dilapidated state of Eastern Croatia's farming industry.

"A Brussels control found that only two percent of the incentives paid for organic farming was justified, and as much as 98 percent were false," Vrankić said, a claim which sent shockwaves through the industry. The HRK 3 billion tally had not appeared in public. "And now they are demanding that the money be returned, three years back. We're talking about a billion kunas per year."

He added farmers were being asked to disperse the cost equally as an act of solidarity.

Agriculture Minister Marija Vucković called the accusations "untested and completely inaccurate" in a lengthy statement pushing back against Vrankić's claims. 

Croatia set aside nearly EUR 130 million in funds allocated for organic farming between 2014 and 2020, 15 percent of which came from government coffers. The boom in organic products — namely nuts — left the fund depleted. The Ministry requested larger sum in the next round of funds, which are still in negotiation and uncertain because of the coronavirus outbreak.

"Unfortunately, irregularities in the use of aid are present," the ministry admitted in its statement. "However, through regular field checks and inspections, such cases are identified and sanctioned in accordance with the scale of the irregularity identified, which has significantly reduced the number of irregularities over time."

Vrakić's claims came at a time of growing uncertainty of food supplies and Croatia's self-sufficiency should the coronavirus have a prolonged stay in Europe. His point, originally, was to show the inaccuracy of the agricultural sector's own production and capacity figures.

Vrakić said food production within Croatia fell below 40 percent, though governmental bodies wouldn't provide figures to back his claim. The EU funds, he added, add to the misconceptions about Croatia's ability to feed itself.

"Incentives are being raised to desolate fields where no one produces anything," he said.

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