Agrokor – Croatia, the War, and the Future

Averting Yet Another Collapse Of Croatian Government

April 29, 2017 by inavukic 27 Comments

Croatian Prime Minister
Andrej Plenkovic
Photo: Damjen Tadic/ Hanza media

When upon my return from Croatia a few weeks ago I wrote about my observations on the state of the country one thing that rattled me a great deal was the extent to which the threatening bankruptcy of one private company (Agrokor) was shaking-up the whole country. Subsequently, Croatia was faced with an almost unprecedented, possibly ill-conceived move by the government to rush in new legislation that would enable it to take over the administration of the same company. Be that new law as it may, the Agrokor affair has created a monster that has reeled everyone into a storm of political possibilities and impossibilities.

As the phenomenon of turbulence would have it a rush of new wind either intensifies or stops devastation. The public revelation few days ago that Croatia’s finance minister Zdravko Maric is Agrokor’s former Executive Director for Strategy and Capital had sent the wheels of political winds into a wild spin, threatening the collapse of the government.

Presently, Croatian Prime Minister Andrej Plenkovic is making last-ditch attempts to save the country’s government from collapsing second time in six months after sacking three ministers from its government coalition MOST (Bridge coalition of independent lists) partner amidst their, as well as MOST’s parliament speaker Bozo Petrov’s insistence that minister Maric could no longer enjoy parliament’s confidence and must go. They allege that Maric was in the know about the appalling financial situation in Agrokor and may have contributed to the threatening bankruptcy while working in Agrokor and Prime Minister Plenkovic stands firmly behind his finance minister, prepared for an all-out political combustion that may swallow his government into the cavern of no return. Ministers summarily dismissed/sacked are Interior Minister Vlaho Orepic, Justice Minister Ante Sprlje and Environment and Energy Minister Slaven Dobrovic. But, these sacked ministers are digging their heels in and refusing to go quietly – spurred on undoubtedly by their MOST leader Bozo Petrov who – wrongly to my view – insists that Prime Minister has no powers to sack ministers and that such sacking is tantamount to breaches of the constitutional order.

It needs to be said that the current Croatian Democratic Union/HDZ led government was constructed on sharp and deep fault lines that include coalition with the MOST whose political currents had trailed a path of seeking reforms on basis of criticising the HDZ majority rather than putting forth concrete submissions for reforms through camaraderie and reasonable compromise if need be. Furthermore, MOST and its leader Petrov were instrumental in the bringing down of Croatia’s former government in June 2016. So, the current Government was always going to be susceptible to dramatic shifts in the political landscape particularly if one considers the real possibility that MOST and Petrov are about bringing instability to Croatia – a reminder of the way UDBA/ Yugoslav secret service operated and still operates even if Yugoslavia has ceased to exist more than a quarter of a century ago.

Whether the aftershocks of the current political crisis in Croatia will cause the government to collapse is yet to be seen, but one expects that Prime Minister Plenkovic will do the utmost in his power and knowhow to avoid it. It’s too early to say whether the parliament will render a vote of no confidence in finance minister Maric driven by Petrov, but even if it does a collapse of government does not necessarily follow.

Amidst current trade-offs and talks to avoid a government collapse indications are that any new HDZ’s minority government and its stability will depend on whether similar fault lines to the ones that are currently causing epic tremours appear in new coalitions away from MOST. Given the political leanings on the scene the players in a new refurbished government may come from an available political mosaic of smaller parties such as HNS (Croatian People’s Party) and perhaps the unpredictable HSS (Croatian Peasant Party), some lone political party such as Milorad Pupovac from SDSS/Independent Democratic Serb Party as well as the independent members of parliament.

The prospect of Milorad Pupovac from the Serb party entering into a new government coalition is, frankly, frightening and utterly destructive. The overwhelming sentiment among the Croatian people is that a Serb associated with still unresolved condemnation of Serb aggression against Croatia in 1990’s that had as one of its tasks to stop the creation of an independent Croatia should not be in government. This sentiment is completely justified in this era when Croatia must turn a page and start living as a truly independent Croatian state that gives no leverage of success to any undermining coming particularly from Serb leaders, who are more loyal to Serbia than to Croatia.

Should HNS/Croatian People’s Party be the one to boost the government’s survival prospects then one would expect that its former president Vesna Pusic retracts her past statements in which she falsely and maliciously accused Croatia of aggression against Bosnia and Herzegovina during the 1990’s. Otherwise, any coalition between HDZ and HNS forming a government will be poisoned by Pusic’s extraordinarily evil statement. HDZ is the late president Franjo Tudjman’s party, it is the party that victory and Croatian independence are indebted to – a political marriage between that party and the party that still houses Pusic is unthinkable without Pusic’s public retraction of her vicious and false statement about aggression against Bosnia and Herzegovina; and without her public apology.

If alliance between HDZ and HNS ensues without resolving the Pusic statement then this is likely to be a scenario when civil unrest becomes really dangerous. That would be the time when everything begins to get truly confusing and crazy. It will defeat a great deal of needed and possible reforms and ensure a crash and burning of political and economic climate starting in 2018.

An unthinkable prospect of Social Democratic Party/SDP forming alliances with view to forming a new government, thus avoiding new and snap general elections sits like a dagger in the chest.

“We will seek new partners to continue the government and ensure political and economic stability,” Prime Minister Plenkovic told reporters in Zagreb. “Should in the next days there be no possibility to form a new parliamentary majority, we are ready for new elections.”

In the 1960’s British Prime Minister Harold Wilson coined the phrase “a week is a long time in politics” and currently in Croatia it feels like an unpleasant, tense eternity. A government collapse at a time when a third option amidst two major parties’ leads has not yet clearly appeared on the horizon as a shoe-in, a certain winner at elections, would spell more of the same and fuel the vicious political circle that has not brought the reforms or changes needed for Croatia. It is at times of collapse that party loyalties become stubborn, no room nor will to look the other way and embrace new political forces even if these may hold the biggest yet promise that Croatia will survive as an independent Croatian state, free, determined and wilful in creating the economic atmosphere for prosperity and well-being. Ina Vukic

Filed Under: Uncategorized Tagged With: Agrokor, Andrej Plenković, Bozo Petrov, Croatia, government collapse, Milorad Pupovac, political crisis in Croatia, Vesna Pusic, Zdravko Maric

Croatian Economy: Rogues, Thieves And Other Vermin

April 12, 2017 by inavukic 15 Comments

Croatia’s Prime Minister Andrej Plenkovic (L)
Extraordinary Commissioner for Agrokor Ante Ramljak (R)
Photo: Dragan Matic/HANZA MEDIA

When the government of a former communist country (Croatia) brings about and takes over with forced administration a calamitously failed private company (it subsidised and helped along the way as did the communist Yugoslavia regime via nationalisation of private assets and borrowed money injections) the gut tells you, regardless of the threat of thousands of job losses if that company sinks, you’re more than likely dealing with attempts of cover-ups of major incompetence, possible embezzlement come thefts and politically driven paths to sell and hand over the company or notable parts of it to a new entity. The private company in question is Agrokor (that employs some 60,000 people – dubbed the largest employer in the Balkans) and while the Croatian government is gung ho on bringing in domestic and foreign professionals to save the company from bankruptcy the fact remains that the government will be the one to choose those professionals and some members of the government may well have in their past dealings contributed to the downfall of Agrokor – professionally and/or politically.

Croatia’s Prime Minister Andrej Plenkovic is adamant his government is taking the right steps in its chosen path to save Agrokor but that view is certainly not shared by many, including Moody’s Investor Services who have April 11 downgraded Agrokor’s credit rating because of the new moves to restructure Agrokor and its family companies under the new special law passed in Croatian parliament as legislative foundation for the government to take over the administration of the company. Moody’s project that, with the new law (Extraordinary Management Proceedings in Companies of Systemic Significance) default is highly likely for Agrokor, especially due to emerging uncertainties in the restructuring process for the company.

Ringing in my head: when did Croatia’s Prime Minister and his government become expert in strategic corporate management? So far, for the last twenty odd years, including this one, all Croatia’s governments have been “famous” for is their mismanagement of the economy and privatisation, and yet this current government continues to demonstrate its certainty that they always know best, even if the country is in free-fall economically due to government mismanagement, or rather, due to business knowhow incompetency inherited from the communist era.

So, Croatia is struggling to contain the economic fallout from problems at heavily indebted food group Agrokor, the restructuring expert appointed by the government to lead the process Ante Ramljak, now the (extraordinary) Commissioner for Agrokor, has commenced his work a couple of days ago and vows to do his best to save the company from bankruptcy. On the other hand Moody’s would suggest we buckle-up and wait for the inevitable bankruptcy of the company. According to the data from last September, Agrokor’s debts totaled around 45 billion kuna (US$6.42 billion), or six times its equity

On Friday 7th April, Agrokor’s CEO and majority owner, Ivica Todoric, handed over control of the indebted company to the Croatian government. Mr. Todoric activated a process of ‘extraordinary management’ following the passing of the abovesaid special law that was voted through by Croatia’s parliament that same day.

The special law, nicknamed “Lex Agrokor”, applies to companies of systemic importance to Croatia. The company must employ more than 5,000 workers and report revenue of at least HRK7.5 bn (€1bn). The law was formed to avoid the impact of Agrokor’s bankruptcy on the Croatian economy. Agrokor’s revenue stream of €6.5 bn in 2015 made up 15% of Croatia’s nominal GDP, and has 60,000 employees in Croatia and in other Balkan markets.

‘Lex Agrokor’ empowers Croatia’s judiciary to name Agrokor’s overseer and to placed it under the control of the Ministry of Finance. The judiciary’s appointed ‘extraordinary commissioner’ – Ante Ramljak – will oversee the restructure of Agrokor and its debt repayment as well as ensure payments to suppliers and maintain the flow in supply chain in the retail and food and agriculture business segments. The law stipulates that if within 15 months, following the activation of this law, a settlement is not reached between the debtor and lender then bankruptcy proceedings can begin.

From the Croatian government’s website we learn that “the coordinating committee of Agrokor’s financial creditors comprises Erste Bank, Privredna Banka Zagreb, Raiffeisenbank Austria, Sberbank, VTB Bank (Austria) AG and Zagrebacka Banka. The representatives of the banks support the legislative and institutional framework and also offer support to Ante Ramljak, who has been appointed receiver to Agrokor, Plenkovic said after the talks. The banks are ready to give a new loan, that is fresh liquidity to Agrokor, so as to enable this ailing retail and food concern to pay its workers and suppliers and help the group to function.”

The biggest Russian bank Sberbank is doing everything it can to support the Croatian Agrokor concern, to which it is the biggest creditor, stated recently the CEO of that Russian bank Herman Gref, adding that Sberbank does not want to manage retail in Eastern Europe. “We’re in close contact with the owners and management of Agrokor and we continue to support them. We will do everything so that the company remains standing and solves its temporary problems. There is a plan to get out of this situation which has been agreed with us,” Gref said in Moscow, without giving details.

The possibility exists that Russia’s companies could buy significant units in Agrokor – what a way to get Russia’s paws into the Croatian economy! Oh, how the former and current and redesigned communists network! Sadly, no easy sleeps seem possible for many of Croatia’s people in the foreseeable future.

Croatian government’s move to extraordinary and emergency control of Agrokor is nowhere near the concept and practicality of government bailouts we’ve grown to know in Western democracies since the 2007-2008 GFC. What’s happening with Agrokor is a takeover reminiscent of dictatorial entrenchments that do not equally and with same intensity open up to creating new avenues for job creation in case Agrokor does go into bankruptcy at the end of the day. All eggs in one basket so to speak. Not a good way to go. Ina Vukic

Filed Under: Uncategorized Tagged With: Agrokor, Andrej Plenković, Ante Ramljak, Croatia, Croatian economic crisis, Extraordinary Management Proceedings in Companies of Systemic Significance, government takeover of private company administration, Ivica Todoric, Lex Agrokor

State Of The Croatian Nation – Observations

March 31, 2017 by inavukic 14 Comments

Taking into consideration the seemingly prevalent mood, the problems that revolved around me during the last three weeks while I was visiting Croatia in March point to an alarming and concerning situation from which one can conclude that Croatia is revolving in a destructive circle whose orbit needs to be thwarted as soon as possible and Croatia returned to the principles and directions that it set for itself 27 years ago when it headed on its path to independence.

Today, people in Croatia are tired of big democracy that isn’t really there, as it is in the West, and the roots of such desperation lie in bad privatisation that was marked by uneducated and money-hungry political elites – from Pantovcak (Office of the President) across Mark’s Square (Government offices) to the Parliament as well as to the local government levels. Great possibilities exist in Croatia but, in the face of the still existing well-networked communist mentality, which evidently still expects that others solve their problems from personal life to jobs as it did during the Socialist era, most people are afraid for their personal existence.

The citizens appear to be suffering more and more from apathy or depression thinking that nothing can be changed, and this is exactly what is dangerous for a young democracy. There are individuals who have the will and who are trying to change things but are quickly disabled or trampled upon by the networked family, political party and particular personal interests machinery.

And when a certain hope for progress appears, or as it did two years ago with the change of President or recently with the change of Government, one quickly sees that the destructive structures soon thwart them, stop them in the realisation of goals they promised during election campaigns. The political-economic climate is filled with big words borrowed from Western democracies but without matching results and so we continue spinning in a circle, and palpable results are nowhere to be seen.

Not even the long-awaited entry into the EU has moved Croatia forward because it had been presented to the nation as an almost instant saviour and we have demonstrated that we are not up to the task of acting as equal partners in that organisation. After all, we couldn’t be any other way when the old communist mentality and habits wreak havoc at almost every level and crevice of public administration and processes.

What’s to be done: like others I too have been saying repeatedly that investments or capital are not enough to lift Croatia into the prosperity it once planned for, demographic revival, with which without doubt comes a spiritual revival, that is – fresh ideas and more people who have learned how to lead a country and how to make the people more satisfied, is also needed but even after 27 years the Croatian emigrés have no role in Croatia as similar population structures have in, for example, Israel, Ireland and the newest diaspora efforts occurring in India, etc. Emigration is not only a demographic revival of Croatia but the ideas and the knowhow it brings are more important than capital itself, and I dare say that the most important thing about émigrés is that they have no fear – that is, they are independent and have no fear of those in Croatia who try stopping various processes in order to save or keep their own positions there.

Besides the need for lustration, which is running terribly late in Croatia, a climate for the cessation of auto-censure needs to be created because people are afraid to express their ideas and wishes, and such people are vulnerable to manipulation and are not active members in the creation of a better Croatia, which we wanted when we headed towards the battle for independence.

Through conversations with many people of different intellectual, business and political groups I realised that the situation in Croatia is much more serious than seen by Brussels or other centres of power and they will not help with anything unless Croatia itself starts the changes that are needed.

Ivan Pernar,
Member of Parliament, Live Wall
Photo: Index.hr

I noticed neglect in the work with the young, whose idols are becoming populist tribunes such as Ivan Pernar (whacky and often bizarre member of parliament), and that is of short breath or incongruous with the expectations we have of youth in general in the developed democracies. Because of their self-interests the political elites do not permit change of generations nor are they preparing the young or other people to take up positions in society and, hence, we have the same city mayors for 20 years, the same members of parliament for 20 years, the same public company directors for 20 years … which, of course, works against stimulating further progress and as a result our educated and our young are leaving the country. I hold more dangerous the fact that the young do not feel needed and that they cannot change anything than the fact that they are unemployed.

To think that the whole country (Croatia) is trembling because of one private company like Agrokor, which employs some 60,000 people, is blackmailing the government with those jobs, while it brought ruin upon itself by itself in the process of receiving government subsidies and other perks, never seeking help with company governance but doing it all on its own, and when forced against the wall pulls the whole country by the nose – is something that’s unthinkable in Western democracies.

General Zeljko Glasnovic
Independent Member of Croatian Parliament for the diaspora
Photo: dnevno.hr

Alarming indications of a dying nation are not taken seriously, and there is no adequate immigration policy or long-term vision but, instead, every new government goes its own way, pushing the country deeper into crises and hopelessness.

The bright spot in my visit to Croatia was the widespread realisation of what needs to be done and, hence, I believe and hold that the diaspora, as it did during the 1990’s, can serve as a flywheel of changes if we got together as we did before and with such strength found an opening into Croatia whose doors appear mainly closed for us. The fact that confirms this is found in that there are only three seats in parliament designated to the representation of the diaspora (and only one of those representatives, independent member General Zeljko Glasnovic, maintains a determined representation of the need for changes in the status and the role of the Croatian diaspora) and three seats is not even close to being enough. I believe that those representing the diaspora in the parliament should be independent, not members of political parties, so as to avoid the threat of political party or interest groups’ influences. Ina Vukic