Saturday, 20 November 2021

Crop Company Wants to Invest 18 Million Euros into Croatia

November the 20th, 2021 - The agricultural technology Crop company published an ad on LinkedIn recently which they stated that they were on the hunt for land for the construction of the first high-tech greenhouse into which they plan to invest a massive 18 million euros, with the help of their Dutch partners, Dutch Greenhouses.

As Poslovni Dnevnik/Marija Crnjak writes, the Crop company was founded last year by entrepreneurs from the digital business and public relations, Jan de Jong and Jerko Trogrlic, known to the public for the project of promoting digital nomads and the digital nomad permit (often wrongly referred to as a visa) in Croatia.

The goal with the Crop company is to implement the latest Dutch technology for greenhouses, which enables the efficient achievement of high quality production with hydroponic cultivation, for both the domestic market and for exports.

As early as last year, they pointed out in public that they already had many potential investors who had showed some significant interest, and then they considered several locations, but apparently none have worked out for them so far.

"There is a lot of unused land across Croatia, but it isn't easy to find land that meets all the criteria, as each location has positive and negative sides. Together with our Dutch partner, Dutch Greenhouses, and their agricultural investment fund, we plan to invest 18 million euros in a greenhouse that will cover six hectares, and use the latest Dutch technology, including lamps for winter cultivation,'' they stated.

They also stated some more specific requirements for their investment in land - they need flat land with a total area of ​​12 hectares, of which 6 hectares will be intended for the construction of greenhouses, and the rest for a solar power plant, but they also need good infrastructure related to energy supply. Since they plan to employ about 70 people there, it is desirable that it be located next to a settlement of at least 5,000 inhabitants.

They would like to see their first greenhouse in continental Croatia, ie in the Bjelovar-Bilogora, Virovitica-Podravina, Brod-Posavina, Osijek-Baranja, Vukovar-Srijem, Pozega-Slavonia or Sisak-Moslavina counties.

For more, make sure to check out our dedicated business section.

Friday, 12 November 2021

Darko Pervan Investing 18 Million Euros in Construction of Hotel Slano

November the 12th, 2021 - Darko Pervan is set to build Hotel Slano in Slano, close to the City of Dubrovnik in the extreme south of Dalmatia, investing a massive eighteen million euros in the process.

As Poslovni Dnevnik/Suzana Varosanec writes, with the recently obtained building permit, the first greenfield hotel-tourist project of the Swedish-Croatian entrepreneur Darko Pervan is starting its full realisation in the form of Hotel Slano.

In the public eye, Darko Pervan is most perceived for having made significant investments in the domestic wood processing industry and for the successful operation of several export-oriented wood companies in Ogulin, Bjelovar and Otok, which are all now in great investment momentum. Over more recent days, the process of ownership takeover of Vinkovci-based DI Spacva into the system of Darko Pervan's Bjelin Group is coming as on as the ''icing on the cake''.

However, in parallel with these activities, Pervan's investments in the hotel, tourism and real estate business in the attractive area of ​​Dubrovnik and its wider surroundings have been taking place for more than a decade and a half. More broadly speaking for the Croatian hotel industry, in which greenfield investments in the past period were not the dominant form of investment, it has marked a significant step forward.

The Hotel Slano project otherwise covers an area of 10,000 m2 and the new facility's planned value stands at around 18 million euros. Hotel Slano, when it starts operating, will be a four star hotel, but only in the initial phase of business, since the investment project envisages new hotel construction according to the highest category standards, as was confirmed by Stjepan Vojinic, a member of the Management Board of Pervanovo Group, who is also the President of Bjelin Group.

"By the end of the year, an invitation will be sent out to the contractors," said Vojinic, adding that immediately after the selection of bidders, the Hotel Slano project will start because the goal is for the new hotel to start operating in time for 2024's summer tourist season.

At the same time, it is the second hotel in a row from the Pervanovo group. The first is the Hotel Kazbek, a restored Renaissance castle that was owned by the Zamanja family. The total investment in this part of the business together with the investment in Hotel Slano has risen to around 85 million euros.

With about 20 apartments in Dubrovnik and a number of villas (for example the Villa Riva Apartments, Villa Tereza in Cilipi, and Villa Franica in Dubrovnik), these latest operations mark the completion of the renovation of the former Ohmucevic family palace, which will operate as a residential villa.

The Bjelin Group consolidated to around 700 million kuna in revenue in 2021, and after a series of acquisitions, with the latest being that of Spacva, it completed the period of growth based on this leverage. This means, as Vojinic pointed out, that in the coming period the plan is to realise growth that is organic - by increasing production and sales, with the factors they have mastered, such as human resources and raw material base. Today, with a total of 1,750 employees, of which Spacva has 840, the Bjelin Group is the largest employer in the wood processing industry.

For more, make sure to check out our dedicated business section.

Saturday, 18 September 2021

Enormous Interest for Croatian Tourism Investment, But Issues Remain

September the 18th, 2021 - The interest for Croatian tourism investment has never been more intense as we get a more firm hold on the pandemic, but in the usual Croatian way, multiple issues and obstacles remain.

As Poslovni Dnevnik/Marija Crnjak writes, the interest of investors and hotel brands in Croatian tourism has never been higher, which is partly due to the coronavirus pandemic that has made us delve into other virtues.

Croatia has a great opportunity to develop some new quality projects for Croatian tourism investment from both at home and abroad, it's also an opportunity to restart the country's tourism in much more sustainable direction than we were heading in before the global pandemic struck. Still, the big question is whether Croatia is ready for these investors and their demands and ideas, as well as changes to the value-added tourism model, or whether we will continue to boast about ''having results which are better than those of our competitors'' in the second pandemic-dominated tourist season that actually happened, like many things do in and to Croatia, quite by accident.

Due to this attitude, Croatian tourism could end up very disappointed in 2022, from which a lot is already expected. This could summarise the messages sent in the two days of the ninth edition of the regional conference Adria Hotel Forum by the participants of a series of panels and discussions on the future of tourism after the pandemic and the sustainability of travel, climate change and even seasonality. While it’s not just an investment conference, investment and project development opportunities are always the number one topic.

"It's true that so far we haven't had such a large share of participants from abroad at the AHF, and never before has there been such an interest in the entire region, including Croatia. These are still not huge institutional investors, but regional ones, but that's also a good direction to go in. The level of interest is particularly high for Albania, while Montenegro currently has a problem with political instability, which has made investors cool off a bit.

But while on the one hand investors are very interested, we still aren't really seeing equal interest on the Croatian side, we don't offer them any projects, it's as if we don't even need investment, but we're once again focused on how great we did during the height of the tourist season, and we're busy bragging about being the best in the entire Mediterranean. Just to remind you, Greece conducted a study back in April in which the most optimistic option was to return 70 percent of the flights they saw from 2019, and they returned 72 percent. We've raised our prices this year and we haven't done much at all to make our next season any more stable,'' said Marina Franolic, the regional director of Bench Events, which organises AHF.

Kristian Sustar, the development director of the well known Croatian Uniline agency with many years of experience in hotel management under his belt, agrees that the next tourist season could be a big disappointment for Croatian tourism as a whole.

"Our season lasted only a couple of months, and as much as the numbers were better than we expected, it was full of challenges for all sectors, agency traffic failed to make a come back, hotels were filling up only at the last minute, which means death for price policy. We missed the chance to sit down together and decide how we want to see Croatian tourism in the future, with no one looking at the long term. Next year we're going to have a big disappointment on our hands,'' believes Sustar.

Investors have their own view of things and although they claim that Croatia has changed significantly in the last ten or so years as a destination and as potential target for Croatian tourism investment, there are still very few concrete announcements to speak of. The only currently active developer at this conference was Slovak Ludovit Cernak, a partner in Sitno Holding that works on developing serious tourism and real estate projects on the islands of Ugljan and Hvar, and is full of optimism for Croatian tourism investment.

"Croatia will never be Cannes, but it will be a very important destination, and that's why it is very attractive to investors at the moment. It is no longer seen as a cheap version of Italy or Spain as it was ten years ago, things have changed,'' said Cernak, who claims that Ugljan has a chance to become the Croatian Caribbean.

Opportunities for expansion in Croatia's wider region are also sought by various hotel companies, which are interested in the Adriatic coast, but also in cities such as Zagreb and Belgrade, Bratislava. David Jenkins, the vice president of hotel development at Radisson sees these cities as locations for lifestyle and fashion hotels. Takuya Aoyama from Hyatt said that we shouldn't forget the continental part of Croatia which lies away from the coastline. He was the only one to mention the need to open a hotel in Slavonia, which longs for such projects.

The global coronavirus pandemic has forced hotel companies not only to become much more flexible in contracting with their owners, but also to play around more with products and offers  - digital solutions for things like checking in have accelerated, rooms can now also be turned into workspaces and dining rooms can be exercise rooms. That said, it seems that Croatia still has some way to go before Croatian tourism investment becomes more concrete, interest means very little when nothing is put into place to make investors sign on the dotted line.

For more, make sure to check out our dedicated business section.

Friday, 17 September 2021

Alongside New Movenpick Split Hotel, More Projects in Works

September the 17th, 2021 - We recently reported on yet another hotel coming to the Dalmatian port city of Split, the Movenpick Split hotel, but that isn't the only thing the company responsible for that has up its sleeve for the Adriatic and the rest of the Mediterranean.

As Poslovni Dnevnik/Marija Crnjak writes, recent news that the first Movenpick Hotel in Croatia is opening in the second largest city of Split, which is one of the premium brands of the global hotel house Accor, presented a relatively new investor, the development company MPPD, which has great ambitions to develop projects throughout the entire Mediterranean.

Their company, Split Peninsula Properties ,will be in charge of the Movenpick Split hotel project, which is worth 25 million euros and which should be completed by 2023.

After the opening of the MGallery hotel a few weeks ago in the same city, this is Accor's second project in Split. As Andrija Antic, a partner in MPPD and the founder of Split Peninsula Properties explained, the works on the location have only just started.

Business partners

"After we've dealt with obtaining all of the permits and paperwork, we'll be ready to start the work that should get going in a month or two. This partnership with Accor fits perfectly into our vision and philosophy of creating comfortable, exclusive places for guests and the local community. We're proud to be able to bring such a top quality brand to Split and the whole of Dalmatia,'' Andrija Antic said.

On MPPD's website, among current and future projects, only this hotel in Split is mentioned so far, although the company presents itself as a developer in the Mediterranean. Antic's partners in the project are Janko Vrgoc, the former director of GPD Zagreb and the company Arena centar upravljanje (management), and Tomislav Mustapic.

“MPPD is a development company with a number of projects going on throughout the Mediterranean, Greece and Montenegro. These are commercial real estate projects (not residential ones), including logistics and mixed-use projects, but at this moment in time, we aren't ready to reveal any details.

Along with us, several partners from various sectors, from construction, finance and development, the project is accompanied by "High Net Worth" individual investors from outside the Republic of Croatia, who also participated in the Movenpick Split hotel project,'' explained Antic.

Located on Split's very popular Znjan neach, Mövenpick Split will have 156 rooms with stunning sea views, two restaurants and a spa, as well as an innovative workspace and conference facility. It will also have 110 underground and above-ground parking spaces with a large number of e-vehicle charging stations, a rooftop restaurant, a lounge and a terrace with an infinity pool.

The project is signed by local architect Alan Plestina from the Pulsar Architecture studio in collaboration with Accor's design and technical services team. Plestina is, among other things, the author of the projects of the Arena shopping centre complex and the Arena Zagreb sports hall.

Twelve active projects

The Movenpick brand itself is part of the more luxurious part of Accor's portfolio, which was founded back in 1973 and currently manages more than 90 hotels across 25 countries. In Northern Europe, Movenpick is currently implementing a total of twelve projects, and Eastern Europe is considered very attractive for further investment. Accor took over the brand back in 2018 from Arab investors for a price tag of 482 million euros.

"We're happy to be able to present another hotel in one of the most prestigious locations in Dalmatia and thus strengthen our portfolio in the segment of leisure facilities in the region. Movenpick is continuing to grow strongly in Eastern Europe thanks to the continuous expansion of the resort's offer and top facilities,'' said Dilek Sezer, the Accor Group's development director for Southeastern Europe, in a statement.

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

Sunday, 12 September 2021

Strabag Opens New Croatian Building, 10 Million Euro Investment

September the 12th, 2021 - Strabag, which is often engaged in building various structures across the Republic of Croatia, has opened a brand new Croatian building which comes with a huge investment price tag of ten million euros.

As Poslovni Dnevnik/Suzana Varosanec writes, on the occasion of the opening of the company's new Croatian building, Strabag director Veljko Nizetic says that this concludes their strategic project, which, he says, will certainly facilitate and improve the daily business of the company, which is continuously working on a number of key infrastructure and demanding construction projects across Croatia.

"Investments like this in the asphalt base and in ancillary buildings and plants, as well as the employment of new people and the expansion of production, we see as a logical step in the growth and development of the company," explained Nizetic.

Strabag, one of the leading construction companies in Croatia, at the company level with more than a billion total revenues in 2020, has completed its strategic project which additionally positioned itself in the vicinity of the City of Zagreb and Zagreb County.

On a little more than two thousand square metres, as part of the asphalt base in Donja Lomnica, the company has opened a new business - a new Croatian building. It is, as stated, a total investment of almost ten million euros according to a recent announcement from Strabag.

The new Croatian building was built near the asphalt base, which was put into operation back in May 2020, and is the ninth base that Strabag has here in Croatia. In addition to office space, the new Croatian building houses a central laboratory for the quality control of concrete, asphalt and other materials used in construction, and, as they say, a central workshop for the repair and maintenance of construction machinery.

In his opening statement, the director of Strabag, Veljko Nizetic, assessed the huge level of importance of this and similar investments, especially in the context of further expansion of production, as well as the growth and development of Strabag's business overall. Namely, according to the director, this concludes their strategic project which will certainly facilitate and improve the daily business of the company, which continuously works on a number of key infrastructure and some of the most demanding construction projects in Croatia."

For more, make sure to check out our dedicated business section.

Monday, 19 July 2021

British-Iranian Entrepreneur Ali Parsa Behind Enormous Prukljan Investment

July the 19th, 2021 - The wildly successful British-Iranian entrepreneur Ali Parsa is the face behind an enormous Prukljan investment, which the Croatian Government has, at its usual snail's pace, finally given the green light.

As Poslovni Dnevnik/Marija Brnic writes, one whole year after submitting the bid in the public tender of the Ministry of Physical Planning, Construction and State Property, and as many as seven years after being included in the list of strategic projects, the Croatian Government finally gave the thumbs up to a bid from the only bidder who applied for the Prukljan project in Skradin. According to numerous announcements, the move should result in more than 300 million euros of investment.

The aforementioned tender is for the sale and concession of land near Prukljan Lake and the company Dalmatia sport and health resort, based in Split, whose first founder in 2007 was the Dutch company Wittens Praktijk. The former left the company to a new owner a year ago, and The Dalmatian Resort Croatia was also registered in that same country.

In the background of the Prukljan investment project, as a guarantor through his companies, stands Ali Parsa, a British-Iranian entrepreneur with a rich career as an investment banker, who took his place in this challenging scene as the founder of Babylon Health, a system that provides 24-hour healthcare and video messaging via a mobile app.

Parsa founded Babylon Health Ali Parsa back in 2013, and with a system used in more than 60 countries, it has enabled him to rank among the most influential and wealthy people in all of Britain, and that Northern European island nation isn't short when it comes to rich individuals.

Ali Parsa doesn't actually appear directly in the offer for the project of building a golf course, hotels and tourist villas, nor is he mentioned in the plans for the nautical port and wharf in Prukljan, but his name does come up for the Split company Dalmatia sport and health resort. This verification is one of the main reasons why the process of assessing the acceptability of a bid that met all the required conditions took so long.

It turned out to be a problem that instead of a letter of intent from a bank that had to meet exactly the prescribed criteria, a certificate from Nedbank Private World from the island of Jersey was submitted in regard to the existence of money for the project in the amount of 100 million kuna.

As stated in the explanation of the government's decision, the money is owned by a legal entity that is in some indefinite relationship with the investor, who can obtain the said financing.

“In addition to not being familiar with the regulations governing banking on the island of Jersey, and due to the importance of the project for both the local community and the Croatian economy as a whole, the State Attorney's Office of the Republic of Croatia was asked to comment on whether we can invite investors to submit letter of intent.

The State Attorney's Office responded positively and continued to act, and at the request of the Ministry, the investor submitted the requested letter of intent, by which the bank confirmed that it will issue a bank guarantee in the amount of 14 million euros, which is more than the requested 100 million kuna. Noting that the bidder submitted a valid bank guarantee for the seriousness of the bid, also in excess of the required amount, by more than 20 million kuna, it ended up being practically uncollectible due to the swift address of the Croatian National Bank, which doesn't deal with payment traffic from private persons.

The problem was solved by changing the swift address and switching to Hrvatska poštanska banka, thus eliminating the last problem of accepting an offer for one of the largest investments in Croatian tourism.

Along the shores of Prukljan Lake, on an area covering nearly 200 hectares, the Prukljan investment project foresees the building of a golf course with 18 holes, hotels and urban villas with a capacity of up to 1500 beds and at least four stars, as well as a nautical tourism port.

For this purpose, the state is selling a total of 54 hectares of and, for which the investor will pay 46 million kuna, of which 29 million kuna for 30 hectares of land is intended for the construction of a hotel with 1,500 beds, and 17 million for land for the construction of tourist villas.

For the construction of a golf course (18 + 9 holes) with all of the accompanying infrastructure, the Croatian Government has approved the establishment of building rights for a period of 99 years on 136 hectares of land, which the investor will pay 2.6 million kuna per year.

The investor was also granted a 50-year concession on the maritime domain for the purpose of the economic use of two beaches and the construction and use of a nautical tourism port, for which a fixed fee was determined per concessioned area, and variable at 2 percent of annual revenue and a gradual increase of 0.5 percent every five years.

The contract for the Prukljan investment project will be signed within three months at the latest, and the realisation will follow in the next five years.

From available sources in government circles, it has been unofficially learned that health tourism will be developed in Prukljan, which correlates with the background in this investment, as it regards the founder of Babylon Heath, but it is interesting that the Prukljan investment isn't being strongly promoted, which indicates the Government's caution regarding, among other things, the Croatian public's sensitivities about golf courses and the issues that have surrounded them thus far.

For more, follow our business section.

Friday, 9 July 2021

Croatian Political Stability Main Condition for Foreign Investment

July the 9th, 2021 - Croatian political stability is key to sending out the message to the world that it is safe and worthwhile to invest in the country, as small countries like Croatia have little other choice in such a big proverbial pond.

As Poslovni Dnevnik/Vecernji list writes, inventions and innovations should be strongly encouraged in all sectors, and it is naturally necessary to accelerate the digitalisation of industry and the state at all levels, initiate rapid and effective public administration reform, reduce bureaucratisation, state apparatus costs and corruption, and shape a long-term strategy.

All of the above, and basing it firmly on activities related to blossoming sectors in Croatia such as robotics, biotechnology, artificial intelligence and applied cognitive science, is one of the conclusions of the recently held and fourth Rings of the Business Forum Zagreb 2021, where the Ring (Prsten) Association of Croats of Bosnia and Herzegovina discussed how to quickly and efficiently adapt and continue doing business in coexistence with the ongoing coronavirus pandemic.

Pavo Zubak, president of the Ring, which brings together more than 230 businesses operating across Croatia with about 11,000 employees and generating 5.5 percent of Croatia's GDP, said they were acting affirmatively, looking to the future, and trying to build partnerships with representatives of the executive branch and harbour a relationship full of trust.

"Behind us is a difficult and challenging period, and before us lie new challenges and opportunities that we can and must take advantage of. Therefore, it's important to communicate openly in order to jointly prepare projects that can mostly be co-financed from European Union (EU) funds,'' Zuban stressed, emphasising the importance of Croatian political stability for further economic progress.

Prime Minister Andrej Plenkovic (HDZ), the patron of the forum, said that Croatian political stability was the goal of the Government because it was the first indicator that investments could be safely made here.

On the topic of this year's Ring Forum Opportunities and threats facing the Croatian economy in the post-pandemic period, the Minister of Economy and Sustainable Development Tomislav Coric said that there are many challenges that we must overcome. One of them is the absorption of more than 200 billion kuna in various financial envelopes, available over the next ten years.

For more, follow our dedicated politics and business sections.

Tuesday, 15 June 2021

Is Croatian State Playing God by Making Investing Easier for Some Than Others?

June the 15th, 2021 - Is the Croatian state playing God by making it easier for some to invest than it does for others? In any case, a safe business environment stimulates economic growth, and without creating that, the Croatian economy won't be moving anywhere up any time soon.

As Poslovni Dnevnik/Darko Bicak writes, establishing a predictable and reliable business environment is a prerequisite for any sort of economic growth and the application of new technologies through the Industry 4.0, it was said at the Industry Day conference held on Friday in Zagreb, organised by the Croatian Employers' Association (HUP).

Mihael Furjan, President of HUP, pointed out that only investments in new technologies can lead to the creation of products and services of higher added value, and then to the accelerated growth of the economy.

Croatia doesn't produce the necessary staff

All enterrpises must change their mindset and turn to new technologies and modern business models, agreed the interlocutors of the panel.

Kristian Krpan warned that here in Croatia, we have the biggest problem with large companies because they're often neglected in relation to small and medium-sized companies, to which all EU funds are directed.

"The Croatian state is playing God, where it is decided which companies will be helped out and their investments and digitalization facilitated, and which will not get that help. Now we have a situation on our hands in which there is a much smaller difference between small and medium-sized companies in Croatia and Germany than larger ones,'' said Krpan.

He added that productivity among large Croatian companies is four times lower than it is in similar ones in Germany, and that this is a problem that affects salaries, staff and everything else. Jelena Festini Ugrina complained about the fact that the Croatian state has used bureaucratic maneuvers to allocate almost all the money from EU funds and the Recovery Plan to the public sector, while merely throwing a few crumbs to the private sector.

Zoran Gligoric pointed out the problem of an inadequate education system, which is almost in no way connected with the economy and the labour market and doesn't produce the staff that companies need - whether it is secondary vocational education or higher education.

Sergio Galosic said that it is difficult to precisely quantify digitalisation because it is a multidimensional process, and that we need to work harder to eliminate the gap between old and new

“We've been in Industry 4.0 for a long time now and we're comparable, perhaps even better in some cases, than EU companies. From my own experience, I can say that digitalisation has enabled us to grow by 25% and increase our levels of competitiveness. However, we're also aware that it isn't necessary to digitise absolutely everything, but only those processes for which it makes sense to do so,'' concluded Galosic.

A great opportunity to finance new technologies lie in European Union funds, and Natasa Cueic Martincevic from Apsolon tried to explain how we can better cope with the forest of European rules and sources of capital.

She pointed out that Croatia has almost 24 billion euros at its disposal over the next seven years, and mechanisms and opportunities must be created to use as much of that money as possible.

Marin Bek from Ascalia said that it must be clear that digitalisation in the industry will not necessarily increase, double or triple production for everyone, but that it will first of all give us more information from the production process itself. He added that in Industry 4.0, it is primarily necessary to eliminate the gap between new technologies and traditional production, and that everyone must assess what is optimal for production in their respective situations.

Dusko Radulovic from Sensum tried to demystify the term “adaptation to climate change” and explain how knowledge and management of our carbon footprint can reduce operating costs and the consumption of raw materials.

"The economic effects of climate change are already visible - insurance companies have more expensive premiums for houses closer to the sea due to floods, and also due to irregular rainfall, energy and water management interventions are changing," said Radulovic.

He added that the circular economy and energy efficiency will be the postulates of the industry in the coming years.

For more on the Croatian state and investments in Croatia, either from at home or from abroad, make sure to follow our dedicated business section.

Friday, 11 June 2021

Over €800m Invested in Islands in Last Five Years from State Budget

ZAGREB, 11 June 2021 - More than six billion kuna were invested from national funds into different activities and projects for the islands in the 2016-2020 period, the Regional Development Ministry's State Secretary, Spomenka Đurić, told the Croatian parliament,on Friday.

In addition, projects have been agreed whereby seven billion kuna will be withdrawn from EU funds for the development of Croatian islands, Đurić said while presenting draft amendments to the Islands Act under which the amount of water for island inhabitants at subsidised prices would increase from 45 to 85 cubic metres per year.

The government-sponsored draft amendments also provide for state subsidies covering up to 50% of the cost of transport of the water supplied to individuals and legal entities in communities still without connections to the public water supply network.

This state subsidy covers 4,234 households with more than 7,200 members, and in 2020, HRK 17 million was paid for that purpose, she said.

Croatia has 1,244 islands,  and 45 islands are permanently or temporarily inhabited, with 51 maritime routes, 58 community health centres, 102 primary and 13 high schools, and 23 care homes.

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

Saturday, 29 May 2021

Can Croatian Private Sector Reach Planned 8% Investment Growth?

May the 29th, 2021 - The coronavirus pandemic has dealt a heavy blow to investments in Croatia, but could the Croatian private sector ever truly manage to reach planned goals, despite how unrealistic they might seem?

As Poslovni Dnevnik/Jadranka Dozan writes, as is more than usual for the pre-election period, the past few weeks have bore witness to a mini-review of recent investment projects with occasional "ribbon cutting" taking place. The first estimate of GDP for the first quarter is expected, which will show how things are with the level of investment activity compared to the end of last year, as well as the comparable quarter of last year.

Gross fixed capital formation in the last quarter of last year, after an annual decline in the previous two, recorded a 4.2 percent increase. Thus, the decline in investments in 2020 was reduced below three percent, which is more favourable than the Government's expectations from the revisions of the projections with the outbreak of the ongoing coronavirus pandemic.

In the May rebalance, the original plan for investment growth in 2020 was turned into an expectation of a 9 percent decline, and in October a reduction of six percent was expected. The final minus 2.9 percent is primarily due to the double-digit growth of general government investment of as much as 18.7 percent

In contrast, Croatian private sector investment, which has lagged behind the state sector for some time now, sank by a concerning 8.5 percent last year. For this year, the Government's projections envisage 9.9 percent growth in terms of such investments, with a slightly smaller, but still double-digit growth in state ones (15.5 percent), counting on the recovery of Croatian private sector investment, at a rate of 8 percent.

Investment plans, and especially their implementation, are difficult to think of, let alone see in the business sector. Despite that, from some large companies, plans are on track to increase capital investment. Thus, for example, the Fortenova Group, which recently now finally includes Mercator, has planned to realise 125 million euros or close to one billion kuna in capital investments this year alone.

Among other things, with the integration of Mercator, significant investments in the retail network await them. After 192 million kuna of capital expenditures last year, Podravka intended 40 percent more than that for investments this year, ie 272 million, and for the next two years - about 200 million.

The Croatian Employers' Association (Hrvatska Udruga Poslodavca/HUP) points out that their members, in addition to the investments that will be encouraged by the recovery programme, have launched their own investment cycles that are taking place now or will be completed at some point this year.

One of the most attractive investments in the eyes of the Croatian media at this moment in time is that of Rimac Automobili, Mate Rimac's remarkable company which is in the phase of building a new campus, a factory and a test site. At the same time, HT and A1 are continuing their projects of modernising their network and embracing the much talked about 5G.

Following some tribulations, AT has been busy with work in Kanfanar and has invested over 200 million kuna in new lines for the production of heated tobacco products, and Vetropack Guard has started a new investment cycle. It is planning a greenfield investment on the HUM-Zagreb stretch, which will increase their production capacities, and it also intends to complete the project this year.

Furthermore, in the Porec zone, Pical Valamar will realise investments in the total amount of 1.5 billion kuna by the end of the year. This includes the Pinea Hotel, the largest single investment in the Croatian tourism sector worth a massive 790 million kuna, the construction of which began back in the autumn of 2020. Algebra is also completing investments in advanced IT infrastructure and international networks, and is also building a new University campus.

The above speaks volumes about the state of investments, at least those which have been pre-planned, in the Croatian private sector when compared to Government hopes and projections. That being said, the coronavirus pandemic continues to hold the keys to everything, and epidemiological changes for the worse could throw a proverbial spanner in the works.

"Part of the already prepared investments for this year have been stopped due to the coronavirus crisis, and members of the Croatian Employers' Association have expressed a total readiness for about 40 billion kuna of investments in high value-added projects that will stimulate economic growth and development, as well as create 100,000 jobs in the Croatian private sector,'' they pointed out from HUP.

However, as they have been warning for months now, they reiterate that without encouraging investment through the National Recovery and Resilience Plan (NPOO) and the EU Multiannual Financial Framework (MFF), many planned investments will not start because our country's investment climate is still not good enough to attract significant foreign eyes, and as such foreign investment. That is why, they say, the NPOO is an opportunity like no other that Croatia must not and cannot afford to miss.

Government projections

These sources of funding were also taken into account in the projections recently presented in the Government's Convergence Programme. In addition to the expected capital inflows from EU funds, and especially new instruments financed primarily by funds from the Recovery and Resilience Mechanism, it also envisages significantly faster growth of investment activities next year - at the general government level of more than 30 percent, and in the Croatian private sector, about 13 percent.

The Ministry of Finance expects, as they say, the continuation of favourable dynamics in the construction sector in the short term, largely due to the need to renew the housing stock after the earthquakes which rocked both Zagreb and Sisak-Moslavina back in March and December 2020.

"As a result of the projected effects of the NPOO, but also of the favourable base effect due to decent achievements from back at the end of 2020, expectations for the remaining types of investments have been significantly raised," the Programme states.

However, the ongoing coronavirus crisis has placed the focus primarily on preserving financial stability for many and threatening the balance sheets of many others. This is especially true for small and medium-sized enterprises. In any case, in the corporate sector, the forthcoming period will impose the need to strengthen those enfeebled balance sheets for many, if not for the vast majority.

Doing business in a global pandemic

When it comes to large companies, one of the largest Croatian investors for years is of course INA, with annual investments at the level of between 1.5 and two billion kuna in the last ten years alone. Last year was one of the most challenging for this massive company, as it was for the global economy amid harmful lockdowns and difficulties with imports and exports.

According to INA, business operations during 2020 were adjusted to preserve the company's financial stability and thus protect their long-term strategic investments, such as the project of building a processing plant in Rijeka, which will ensure the sustainability of INA's business in the future.

This is an investment worth about four billion kuna, and thanks to the new plant, the product structure of the Rijeka refinery should be improved in such a way that the share of profitable white products, ie motor fuels, will increase. Work on the plant is underway, they say, and completion is expected by the end of 2023.

This project is part of the INA R&M New Direction 2023 programme, which envisages the concentration of oil refining in Croatia at the Rijeka Oil Refinery.

At the same time, sustainable alternatives are planned to be developed at their Sisak site, including bitumen production, a logistics centre and a solar power plant and potentially a bio-component refinery, all of which fit neatly into the European Green Plan and increasing global aspirations towards a low-carbon society.

''The biorefinery is a strategic project with an estimated value of around two billion kuna. We're currently working on "further development and opportunities for additional co-financing of this project, which is a key prerequisite for making a final investment decision," they said from INA.

For more on the Croatian private sector, follow our business section.

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