Croatia For Sale!

Croatia For Sale

 

The loud invocation for foreign (or domestic) investors in Croatia, whose arrival, as politicians and business high-rollers claim, would solve all the problems in the country, has been a daily occurrence in the economic-political circles. It’s been said over and over again that favourable conditions need to be created for investors to come, to bring their money and invest unsparingly.Mouthfuls of rhetoric such as “we need to accelerate the investment procedures, cut red tape, which chased investors away to other more flexible countries…”, ring in the ears of every city, town, village; they all wait – like a frozen figure waiting impatiently in the sun to defrost – for direct investments that would get the economy going and create new jobs.

 

Investors are seen as saviours that will shake up the stumbling, plummeting economy and lead the country out of the recession.
In this mad rush to see a meaningful upward turn in the economy the Croatian parliament had late last year passed the new Act on Strategic Investment that, without doubt in my mind, appears solely designed to serve large investors, many of whom will undoubtedly rush in with their long list of – potentially – white elephant projects. God knows, Croatia has had quite a few of those in the past decades via countless dubious and corrupt privatisation deals.

Specifically, the new law will give preference to investments over 150 million kunas (the equivalent of EUR 20 million) under the patronage and approval of the recently formed government’s Commission on Strategic Investment. Under the new law, approval times for large projects will be significantly speeded up.

The law allows for special ease for strategic projects when it comes to the availability of real property owned by the state. These availabilities include the sale of that real estate without public tender whose market value is determined by an authorised valuer and the release of forests from the state forest fund for sale or for formulating citizen’s rights to these forests. The “public good/use” of state owned properties has been removed and, hence, leading the way to abuse and wheeling and dealing not alien to corruption with which Croatia still struggles miserably. While the law refers to state owned property that is made available to investors it is not far-fetched to imagine that, in the euphoria of strategic investment that “will save Croatia”, the state will come up with more laws and regulations where it will seek to compulsorily acquire private property for the benefit of some strategic investment project in the pipelines. Compulsory acquisitions are usually reserved in the developed world for projects of wider public good or state importance. Indeed, the scenario of compulsory land acquisitions to benefit an aspiring “strategic investor” is very possible given the relatively low investment funds required for strategic investments in less developed areas on the mainland and on the islands. So, for example, if someone comes up with say 3 million EURO – which is not a large sum of money – and decides on establishing a farm of some sort or a fishery or say building a restaurant at a seaside spot and creating 5 new jobs an air of subservience to the investor at the expense of private property will in places, I fear,be created especially at the investor’s insistence on preferential locations. The state already has laws that enable it to acquire farming land in order to increase the size of farmland in its ownership on any particular lot surrounded by private ownership. Indeed the squabbles about rights to land ownership – and therefore transfer to a strategic investor – are likely to increase between the state and local governments even though the state has usurped the rights to absolute decision making, creating an administrative and other procedural nightmares which expose themselves to corrupt practices particularly given the land valuation process, which does not seem to have water-tight checks and re-checks.

A concerning aspect is also the creation of “new jobs” rule that applies to approved strategic investments. According to the Act there is a requirement to open the “new jobs” within three years of capital works completion and maintain/guarantee these jobs for five years in larger projects and three years in smaller and medium projects. Resulting from my personal research into the new laws and regulations so far, there is a lack of clarification as to how many of such new jobs are to be filled by Croatian citizens, locals etc., as opposed to the foreign strategic investor bringing in his/her personnel, as well as lack of clarification as to any monitoring or policing of adherence to the filling of “new jobs”.

The new Act on Strategic Investment in Croatia has as its goal the reduction of administrative procedures – or red tape, if you like – hence playing to a speedy realisation of strategic projects in Croatia. In order to declare a project “strategic,” it must meet several criteria. Beside the capital expense of at least HRK 150 million (approx. EUR 20 million) as said above, the project must be in accordance with spatial planning regulations, which one might well expect can be changed in order to appease a potential investor (?).

If it is possible to co-finance the project with EU funds, this amount can be equal to or greater than HRK 75 million (approx. EUR 9.8 million). If the project is being carried out on an island or in local or regional municipalities that have a lower than average level of development than the rest of Croatia, or the project is related to agriculture and fishery, the total amount of capital expense can be equal to or greater than HRK 20 million (approx. EUR 2.6 million).

In addition to these financial criteria, the criteria regarding the scope of activities pertaining to the strategic project must also be fulfilled. These activities include production and processing, infrastructure and energy projects, hospitality services, industrial engineering projects, logistics and distribution centres, as well as agriculture and fishery. When submitting the project, it is necessary to include an estimate of the number of new jobs and indirect employments, which are connected to the project.

After enactment of the law of Strategic Investment there have been numerous debates and public discussions and commentaries on doubtful purpose of the Act. The major opposition party HDZ has gone as far as saying that the Act provides legal basis for the Government to freely dispose of the state owned property by setting aside the influence of the public and the local governments in decision making process, seemingly empowering the State Strategic Investment Commission with “supreme” powers. Sadly, the public and oppositional debates have not made much difference.

At first glance, this system has the capacity to enable more flexible administration with the state owned assets and ease the procedures and formalities that are necessary for the implementation of projects. Digging deeper, though, bells of caution ring with deafening noise: such broad and supreme powers of few are fraught with the dangers of corruption and granting privileges in valuing and disposing of state property or valuable assets, whether temporary or for long-term, to selected individuals whose ultimate operations and reaping of profits may not be in Croatia’s interests. Certainly, a new door to almost extreme neoliberalism has been opened here and the people at large are sure to suffer in the end. Ina Vukic, Prof. (Zgb); B.A., M.A.Ps.(Syd)

Comments

  1. This is such a powerful blog. Wow!!

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  2. The failure of the privatizations in the 1990s was just a warm-up for what is going to happen with this law.

    The Strategic Investments Act + The Expropriation Act which is under development now = licence to steal from the poor Croat and give to the rich foreigner.

    The protection of the ownership of private land property is next to non-existent in the Croatian constitution.

    More about the Expropriation Act here
    http://www.domovod.info/entry.php?97

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  3. This article is refreshing, esp the critique of neo-liberalism in the context of Croatia. But isn’t a paradox that you sit on the “right” side of the political spectrum and that you are criticising the basis of center and right-wing politics? The HDZ and SDP and HNS all voted for the Dubrovnik golf project, a project that is inhumane.

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    • Thank you Vedran, to my perception the Right and the Left of much of the world has or is turning to neoliberalism (and it’ll take true courage to turn away from it) and hence, to mention only the tip of the iceberg of its effects on people: increasing homelessness, increasing welfare-dependents, increasing insecure jobs, increasing fleecing fleecing of individual wealth for survival…

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  4. Stunning and reality article.Greetings.

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  5. Great Blog. Inward investment is a good thing to invigorate a country that’s had as many problems as Croatia. However, you need to have a Government that’s acute enough to be aware of the needs of the people before going ahead. There shouldn’t need to be a compulsory purchase order available to buy private land unless the occupant is willing to sell and State owned land is owned by the people not the Government so there should always be consideration given as to whether the Croatian people use it. ie, you don’t sell off a popular beach to private investors.
    Where matters like this are concerned and where corruption is/or could be prevalent, consideration as to what is sold should be made by all serving politicians, and the money received from sales should be set for the benefit of the public like parks , colleges etc.
    xxx Huge Hugs xxx

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    • Thank you on your comment David, indeed investment is great but when it reaches the level of widespread offer of valuable state assets to investors without a multilevel check and decision making process and audits then it’s bound to open itself to all sorts of corrupt or preferential treatments etc…and alarmingly it’s bound to cross many barriers including private ownership…

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    • Excellent comment! If I may just add that diligence on behalf of MUP and DORH has to be at its highest level to make sure that the politicians aren’t “slaughtering the whole cow for one steak”, as has happened in the past, selling valuable national interests at fire sale prices just to collect a kickback.
      Also, that is a keen observation about the sale of key strategic national interests like popular beaches. We must be the only country in the world that insists on selling off its long-established, profitable companies like Croatia Osiguranje, again at fire sale prices, while keeping opportunities for manufacturing goods which can be exported out of the hands of foreign investors who have both the money and know-how to come up with and finance mega-projects that would create jobs and inject much-needed foreign capital into Croatia’s budget.

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      • Indeed, Brankec, there have been many “white elephant” investment projects in Croatia and privatisation was/is characterised by running down companies to the ground to make them cheap to buy – fire prices indeed… anything for kickbacks and I don’t see a change with the powers given to the Strategic Investments Commission/government and, of course, the largely corrupt “court valuers” of property…

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  6. Protection of the rights of ownership and enjoyment of private property is one of the fundamentals of conservative political philosophy.

    The foundations
    1. Individual liberty
    2. Rule of law
    3. Protection of private property
    4. Believe in an enduring moral order
    – a. belief in God
    – b. tradition and order

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    • When citizens of a country are brought down to their knees through unemployment etc causing poverty or relative poverty much spirit gets lost from individuals to fight – hence, the need for true political leaders that do not, sadl;y, stand out at this time…Thanks for this Zeljko, these foundations are eroded…the trend seems to be that once the government sells off or privatises its assets it will dip into private ones one way or another to survive in power…so the question remains: who will arise to turn this calamity away?

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  7. therealamericro says:

    Great post Ina.

    Yet again, the government looks at the short term.

    Instead of dropping the tax rate for all domestic and foreign investors, specifically in agriculture and industry to diversify the economy with a special, slow graduated zero to say fifteen percent growth rate over 15 years, this law is tailored to casinos and concrete monoliths for the coast. All fine and well, but the whole country is in trouble, and Dalmatia is already getting too overdeveloped.

    Croatia needs a year round economy. And instead of harassing small cafe owners in the middle of nowhere in Lika for a few short or over Lipa, they should be combing the big companies and big developers for their quite public money laundering, much of which with government subsidies.

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    • Thank you, therealamericro…it is unacceptable to me, and I gather to many, that the governments since 1998 (when the last piece of Croatia was reintegrated into Croatia from occupation) have not managed to add up all the human and material resources within Croatia (including diaspora) and come up with a plan to “regroup” towards strengthening the economy. They’ve used tonnes upon tonnes of “band-aids” to make it seem things are happening but those band-aids do not heal the wound…every country needs a year-round economy but in Croatia the reliance on tourism gives the impression that Croatia has turned its hopes to “retail” – depending on customers that will, might, perhaps might… walk through the door and purchase something. Alarmingly, this government’s policy resembles “begging”: the government bending over to investors at the expense of common good in Croatia

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  8. Good points made over here as Regard to foreign investments, Very interesting, Inavukic,
    Cheers, Aquileana 😉

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  9. Reblogged this on idealisticrebel and commented:
    This is a must read!

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  10. Michael Silovic says:

    Really great posts by everyone. The reality of it is that public lands should never be sold under any condition. The land belongs to the people not the goverment. The lands could be leased with certain conditions and the counties the lands are leased in should gain a majority percentage the profits to be reinvested into those communities from what the goverment collects in taxes. As I have always stated that any companies that get any benefits from the goverment should have to have a minimum of 70% of Croatians employed before any foreigners are brought in. This must be law to prevent over population of foreigners into the country that will change the culture and heritage of our country. We can not have Croats begging foreigners for a hand out or employment. We must not lose our national identity.The goverment also needs to understand that a majority of jobs come from small businesses and this is why it is important that we make the process simpler and faster for the diaspora 2nd and 3rd generations to get citizenship so that they can return and bring their talents and expertise with them to help develop our country. There are Croats all over the world that have any talents anyone could need to develop a business in Croatia and i am sure they would love to come home. As I have written in this blog well over a year ago Croatia is a rich country in natural resources with its oil, natural gas and forestry ETC that should never be sold or trusted to anyone other then Croats. WE Croats should be the gate keeper of all our natural resources so that it can be protected and regulated because anyone who is not Croat and comes in is there for profit and not the best interest of our country. We can use BP as an example of how careless they are with oil spills and the destruction they have caused around the world. This would also prevent some corruption but not all.The goverment needs to lower the tax rates also not only for business but for the people. Many major businesses do not benefit the local economy other then through employment and a majority of the money earned leaves the country. Wealth is created by the people not corporations and the more money people have they spend into local economies that benefit the smaller businesses that sustain cities. AS to the tourist industry I am saddened to say that I do not see it lasting very long if there is a major oil spill on our coasts. It will ruin not only tourism but our commercial fishing and destroy the businesses that need tourism to keep their doors open. For that reason I object to allowing BP to submit any tender because of their track record. recently I posted an article about the diaspora spending close to 7 billion dollars in the Croatian economy. ( I will need to recheck the article for the proper figure in case I am wrong on the numbers) This is why it is important to bring all of us home because we have the money to invest and the knowledge gain abroad to help rebuild a future for our people. One of the things that irks me right now is the spending by our goverment in the military arena when we need to use that money to create jobs for the younger people before the they decides to leave.That money could be used for infrastructure to employ them in local economies that benefit everyone.Great article that I appreciate and hope to someday discuss other issues such as education and the brain drain on our country.

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    • Thanks Michael – now that you mention education I will say that one of the conditions regarding creation of new jobs by strategic investors, beside the rule of employing mainly Croats (on competitive merit of course) should be say 0.5% of operating budget at least to be spent on educating or training Croatian people in skills, which can be from work-experience to seminars, workshops, contributing in funds to tertiary or trade training institutions etc…

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  11. the whole world is for sale and mostly the Chinese are buying… Homes in London are being some to Chinese investors, and soon the entire london area will be overpriced for the locals… eve

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  12. Michael Silovic says:

    Eve, in my opinion the buying spree Chinese are on is only temporary. The reason for the buying spree in major cities is for espionage / political influence purposes. The Chinese learned this from the Israelis long time ago when they did that in the United States. In fact what your seeing now in the USA is a lot of Chinese investments close to silicon valley in California and near our military technology bases.Personally I could care less about England or America as they are getting what they deserved for selling out its people and country because they know exactly what the Chinese are up to and allowing it.Croatia should not fall into this trap and that is why no goverment institutions or lands should ever be sold. Smaller countries internal politics and economics can be manipulated/influenced very easily from outside sources through corruption and the people need to stand watch and be firm in opposition if needed.Croatia with its vast wealth is very vulnerable to the Chinese and Israeli lobbyists and many other countries monies at this time to gain control and power of our country.

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  13. l would like to comment again .Croatia situation ,is a tragedy beyond conceive.Reminds me of the Armenian Genocide ,1 1/2 million of my people were slaughtered by Turkey..Yesterday 4/24/2014 was the 99th.anniversary of the genocide.l have written more than one post about it.May peace wins in Croatia.Jalal

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    • Thank you Jalal, I do follow the developments regarding Armenian Genocide too – the Turk’s denial is such a sadness and so unjust. Perhaps the recent “apology” by Turkey might lead to acceptance of responsibility and justice for the victims.

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    • “In actuality, how Turks and Armenians, as the owners of this common history, can together, through dialogue and empathy, reach a just memory of the tragic events of 1915, which occurred during the great human sufferings of World War I, is already being examined thoroughly and in all its dimensions. In this context, our proposal to establish a Joint Historical Commission, also reflected in the Turkish-Armenian Protocols, remains on the agenda.”

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  14. Ante Saric says:

    Politically, Croatians are not communists but economically they very much are. So I disagree with your premise that Croatia suffers from extreme “neo-liberalism”. If anything Croatia suffers from extreme socialism where the government plays too large a role in the economy.
    Too many Croatians expect the government to take care of them from cradle to grave. Even more absurd many Croatians will not pay the taxes to support their socialist idyll. Dodging taxes in Croatia, like Italy, is a national sport.
    As a result of this dichotomy the country is broke despite its small population and high tourist income. Just like Greece.
    So where does that leave us? In my opinion anything that helps attract foreign and domestic should be welcomed.
    There is no point in Croatia in trying to reinvent the wheel. Open economies are no means perfect but they do tend to produce better outcomes in terms of GDP and employment.
    Croatia just has to bite the bullet and implement reforms to the pension system, labour markets and more importantly reducing the size of Croatia’s public administration.
    This cannot be done by the HDZ or SDP alone but in a grand coalition so the political cost will be evenly distributed and the oxygen taken from populists and demagogues who will fight reforms tooth and nail.
    It is sad that Zoran Milanovic can’t put aside his animosity toward his opponents and work with them for the sake of the country. He seems intent on trying to preserve Tito’s idiotic legacy of an all powerful state and his own privileges.
    So that is the bottom line for Croatia. It is reform or collapse into chaos.

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    • Ante Saric, thank you on your comment, however privatisation in Croatia and organising the economy around investments (non-government) does fall within neoliberalism or liberal economy – that’s why I said the door to it has been opened with this new law etc. But, there should be a limit as to what and how much of national assets should be sold or made available to investors – there needs to be a balance to protect the national “upper hand”. I agree with you that the government still holds a great deal of control and strong presence of the old socialist system still exists but every country needs to find a way to provide or protect its most vulnerable … I too think that investments are a way to go and it’s futile to expect SDP to collaborate with HDZ and vice versa because they all suffer the “know it all” sickness …

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  15. Ante Saric says:

    As for that comment that the proposed golf course in Dubrovnik is “inhumane” all I can say that is just plain idiotic. It is precisely projects like these that the country needs.
    In Australia there are hundreds of golf courses and no one is protesting their existence.
    Those mindless comments are just typical of people who have lived in a corrupt, communist dictatorship and simply have no clue about the modern world.

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  16. Michael Silovic says:

    Ante first of all I do not think the people of Dubrovnik are mindless or idiotic. I have spent much time there in Dubrovnik and found those people to be highly intelligent of there past history and where they want to go in the future. If you understand the controversy of the Jewish developer and his relationship to the political aspect / connection to our country you can see why there are people that are hesitant to support this. Believe it or not I do not believe that the goverment has a right to do as they chose over the wishes of the people. In fact I believe that the local people have a better understanding of their community then the goverment. When goverment tells the people what is best for them then they become sheep. People have a right to oppose any sort of development in their neighborhood that they chose not to support for various reasons. There are many flat lands in Croatia which would be better for the environment to develop a golf course then on a hill that has potential for devastating destruction to the environment and not to mention mudslides since there was never a soil test done for this project to determine whether or not there is such a hazard. There is also an issue of those who lost their life in battle for our home land in this area and some may consider this area sacred. So we must look at all of the issues not just what is best for developers who are not Croats but who are questionable in their past business practice. I also have a problem with the mayors brother being a contractor for the project.i think its close to nepotism and rife with potential corruption. When local people oppose something you can bet they know more then we do. Never under estimate our own people over goverment as we the people are much smarter because we are the last to get our pockets lined.

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  17. Good morning !
    ” CROATIA For Sale ” ???
    Eu credeam ca doar ROMANIA este de vanzare 😦 😦 😦

    Regards,
    Aliosa.

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  18. Ante Saric says:

    Croatians showed great courage and determination in its fight for independence. However, when it comes to business, our workers and entrepreneurs are just plain cowards.
    Instead of wanting to compete on global markets and make “Made in Croatia” a worldwide symbol of quality and workmanship. All they want to do is loaf around, blame others (in particular the government) for their own misfortunes and wait for the same government to bail them out.
    The best example was (is?) the nations ‘s shipyards. For 20 years they us they were the “best” boat builders in the world because Croatia was a “maritime nation”.
    The government was then bullied by the “best” shipbuilders into subsidising them to the tune €2 billion over 20 years. Who knows where the money ended up but we do know all that government largesse did nothing to improve the efficiency or profitability of our shipyards.
    Where there is no Croatian government interference (ie diaspora) the results are the diametric opposite. It is not just Croatians in Germany, Australia, etc achieving amazing results.
    Look at our sportsmen and women take all before them on international sporting fields. Good examples are Luka Modric and Mario Mandzukic.
    All I want to say that you and your are readers are barking up the wrong tree by targeting “neo-liberalism”. Croatians need more freedom not less. Its disgusting, idiotic political class should do the honourable thing and vote themselves out of existence.
    The Croatian state should be shrunk to its smallest size possible. In addition the mountains of red tape removed and the people told in a frank manner that they are on their own. Those who insist on cradle to grave welfare should be told to just leave the country and go to Cuba or North Korea.
    At the end of the day Croatians will have no choice but to abandon its experiment of living well without hard work. If they don’t do it then the free market will do it for them.

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    • I agree on many points, Ante, the best example of dependence upon the government, so individuals don’t have to worry, is the pathetic and pitiful situation in the ability to draw on available EU funds – the government and the people think that the government should know everything including writing successful tenders and they do not – Croatian politicians it seems don’t want to admit they don’t know it all and use consultants to assist with this, they’d rather see the whole thing rot…in many examples… as to neo-liberalism, while it does and may have its advantages it can be a disaster for the vulnerable and needy and every country needs to have way to provide for the needy, the problem in Croatia is inherited from the old Yugo regime where dependence on government was nurtured for decades and this will take a long time to change but also more aggressive moves by the government to make it happen…indeed the diaspora had learned early on that one can only depend upon one self if one wants a decent life, not the life of hand outs

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  19. Great article. Croatia has a long way to go with red tape though. We have land/property in Croatia which is in the process of being registered to the respective owners. It has been three years since the process began and is still ongoing. Something like this is unimaginable in Australia where we reside and would take a matter of weeks. Local corruption is also rife and ingrained in citizens looking to use any situation to their advantage over foreigners who may not be used to the countries inept political and social systems. I do believe it is these systems however that enable this brand of corruption to prosper.

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    • Thank you on comment, Dani B. – it would be most important to tackle local corruption; that would teach the entrenched suspect dealings a big lesson…and turn the situation around to benefit the people and not those in positions of “power”

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