BUSINESS NEWS BULLETIN, NO 173

BUSINESS NEWS BULLETIN No 173 May 13th - 19th, 2000 CONTENTS: ? INDUSTRIAL OUTPUT DOWN 4.7 PER CENT IN APRIL 2 ? 1.29M EMPLOYED IN MARCH 2 ? BANKRUPTCY PROCEEDINGS START IN 44 COMPANIES IN APRIL 2 ? CATERING AND HOTEL PRICES 0.2 PER CENT UP IN APRIL 2 ? 270,000 TOURIST VISITS IN CROATIA IN FIRST THREE MONTHS 2 ? FINANCIAL MARKETS 3 ? DALMATINSKA BANKA PUTS THE BULK OF ITS PROFIT INTO RESERVES 4 ? BANK AUSTRIA CROATIA - BEST PERFORMANCE SINCE ESTABLISHMENT 4 ? MEDIMURSKA BANKA POSTS HRK10.28m PROFIT IN 1999 4 ? DELAY LIKELY IN ISTARSKA BANK CAPITAL INCREASE 5 ? HOK IN FAVOUR OF ESTABLISHMENT OF CRAFTSMEN'S BANK 5 ? PRIME MINISTER RACAN SAYS BOOSTING THE ECONOMY TO BE PRIORITY 5 ? GOVERN., TRADE UNIONS AND EMPLOYERS DISCUSS MEASURES FOR THE NEXT 100 DAYS 6 ? GOVERNMENT BACKS INA'S LOAN APPLICATION 6 ? GOVERNMENT: THE 22 PER CENT VAT RATE WILL NOT CHANGE 6 ? BOARD OF THE CROATIAN PRIVATISATION FUND REJECTS BIDS FOR PRIMOSTEN 7 ? INTERCREDIT'S SOLVENCY ASSESSMENT DOWN IN APRIL 7 ? INA SEEKS STRATEGIC PARTNER FOR CROSCO OIL SERVICES 7 ? VIKTOR LENAC POSTS HRK10m NET PROFIT 7 ? CONSTRUCTION OF PLOCE PORT RO-RO TERMINAL CLOSE TO COMPLETION 8 ? BRODOSPLIT SIGNS CONTRACT ON THE BUILDING OF THREE OIL TANKERS 8 ? RIJEKA TO GET NEW BUSINESS AND TRADE CENTER 8 ? PROTOCOL ON BENETTON PRODUCTION START GETS SIGNED 8 ? BAT CONTINUES INVESTING IN TDZ 8 ? SOLUTION FOR NAMA: TRANSFER OF OWNERSHIP, HRK61m WRITTEN OFF 9 ? DURO DAKOVIC MONTAZA POSTS HRK874,753 NET PROFIT 9 ? CROATIA AND BRITAIN SIGN MEMORANDUM ON TOURISM COOPERATION 9 ? AMCHAM DELEGATION MEETS MESIC 10 ? CROATIAN BUSINESS PEOPLE WANT TO DO BUSINESS IN KOSOVO 10 ? AGENCY FOR WESTERN SLAVONIA ECON. DEVELOPMENT OPENS IN OKUCANI 10 ? MEDICINA I TEHNIKA FAIR WITH DENTAL 2000 EXHIBITION AT ZAGREB TRADE FAIR 10 ? ITTF 2000 TOURISM FAIR AND VINOVITA 2000 WINE FAIR END 10 ? OSIJEK EXPO 2000 FAIR CLOSES IN OSIJEK 11 ? TRADE UNION CALLS ON GOVERN. TO KEEP TO AGREEMENT ON PRIVAT. OF UTILITIES 11 ? TRAIN DISPATCHER UNION ANNOUNCES RAILWAY STOPPAGE ON MAY 23 11 1. ECONOMIC INDICATORS INDUSTRIAL OUTPUT DOWN 4.7 PER CENT IN APRIL Industrial output fell 4.7 per cent in April on the same month last year, and a growth of 1.5 per cent was recorded in the industrial output recorded in the first four months of the year on the comparable period last year, reports the State Bureau of Statistics. Statisticians point to the fact that this April had two working days less than April last year. The April drop follows growth recorded in two previous months, 7.5 per cent in February and 4.2 per cent in March, on the same months last year. The two-month growth, after a fall of 0.7 per cent in January, resulted in a 3.7 per cent increase in the first quarter industrial output compared to the same period last year, but due to the April drop, the growth in the first four months of the year stayed at 1.5 per cent. By main industrial groupings, the January-April period saw a production growth on the same period last year in durable consumer goods, 9.1 per cent, and intermediary products (except energy), 8.8 per cent. A fall of 7 per cent was recorded in the output of capital goods, 3.6 per cent in non-durable consumer goods and 2.1 per cent in energy production. Statistics based on the national classification of activities show a growth in mining and digging of 10.8 per cent in April on the same month last year, and a slightly higher growth, 11.3 per cent, in the four months of the year compared to the same period last year. In the same period, supplies of electric energy, gas and water fell by 4.6 per cent on the month before, and 1.5 per cent on the first four months last year. Processing industry, accounting for nearly 80 per cent of the total industrial output, recorded a drop of 5.7 per cent, and there was a rise of 1.6 per cent in the first four months. Major producers, i.e. tobacco, textile, clothing, publishing and printing industries, saw a drop in the first four months as well. Food and beverage production, representing over 21 per cent of the total industrial output, saw a drop of 4.2 per cent in the output this April on April last year, and there was a drop of 1.6 per cent in the first four months of the year on the same period last year. Contrary to that, production of chemicals and chemical products, which represents slightly less than 9 per cent of the total industrial output, recorded a growth of 10.4 per cent in April on the same month last year, and a rise of 21.6 per cent in the first four months of the year on the same period of last year. An increase on a month-on-month basis as well as in the period of four months was also recorded in the production of other non-metal mineral products, 18.5 per cent and 9.5 per cent respectively, production of metal products (except machinery and devices), 2.6 per cent and 11.2 per cent respectively, machinery and devices, 2.6 per cent and 5.9 per cent respectively. 1.29M EMPLOYED IN MARCH According to the State Bureau of Statistics, 1,291,619 people were employed in Croatia in March, down 0.1 per cent against the previous month. 1,006,436 people were employed by legal persons, down 0.2 per cent against February, and 199,400 persons, up 0.8 per cent, worked in arts and crafts and free-lance professions. According to the evidence obtained from the Croatian Institute for Pension Insurance and regarding working population, there were 85,783 insured farmers, down 1.3 per cent against February. The number of unemployed persons in Croatia in March reached 357.711, up 0.7 per cent against the previous month. The unemployment rate stood at 21.7 per cent. Fishing trade reported the sharpest fall in the number of employed persons which stood at 1,178, down 5.6 per cent and was followed by construction industry with 65,084 workers, down 5.4 per cent and hotel and restaurant industry with 34.267 employees, down 5.5 per cent. The number of workers in processing industry dropped by 4.1 per cent to 251,719 workers. Public administration and defence and obligatory social insurance posted 122,397 workers in the first three months, up 1.9 per cent against the same period last year. Likewise, the number of persons employed in electricity, gas and water supply grew by one per cent to 27,178. BANKRUPTCY PROCEEDINGS START IN 44 COMPANIES IN APRIL In April, bankruptcy proceedings started in 44 companies in Croatia. According to Zagreb-based Bonline, Narodne Novine announced the cancellation of bankruptcy proceedings in two companies and 46 invitations for company liquidations. By type of business, the largest number of bankruptcies, 12, were announced in trading companies, including Zagreb-based Mladost d.d., Vinkovci- based Poljostroj d.d. and Opskrba d.d., and Naprijed- Jakopec d.d. based in Zlatar Bistrica. April saw six bankruptcies in textile industry, i.e. Zagreb-based Vesna d.d., Velika Gorica-based Goričanka Modna Konfekcija d.d. and J.G. d.o.o, as well as Samobor's Sloboda-Tvornica Carapa d.o.o., Endi-konfekcija d.o.o. based in Sv. Ivan Zelina and Moda Potočki d.o.o. While four construction companies announced bankruptcy, metal, chemical, catering, wood, publishing, forwarding and financial industries saw two bankruptcies each, and the rest of the April bankruptcies took place in other business sectors. CATERING AND HOTEL PRICES 0.2 PER CENT UP IN APRIL Croatia's catering and hotel prices increased 0.2 per cent in April on the month before and 1.7 per cent on April last year, reports the State Bureau of Statistics. In the first four months of the year, catering and hotel prices rose 1.7 per cent on the same period last year. 270,000 TOURIST VISITS IN CROATIA IN FIRST THREE MONTHS Croatia posted 296,940 tourist visits in the first three months this year, the same as last year. According to the State Bureau of Statistics, foreign tourists accounted for 121,482 visits, up four per cent. Domestic tourists reported 175,458 visits, down two per cent against last year. Tourist facilities reported 808,498 overnights in the first three months, down three per cent against the same period last year. Foreign and domestic guests accounted for 346,635 and 461,863 touristdays, up one and down six per cent respectively. In terms of the number of overnights, Austrian tourists ranked first and accounted for 14.2 per cent, the Italians accounted for 13.3, the Germans for 12.5 per cent and the tourists from Bosnia-Herzegovina and Slovenia accounted for 11.2 and 10.7 per cent respectively. There were 118,115 tourist visits in March this year, the same as in March last year. Foreign guests posted 53,507 overnights, the same as last year, while domestic guests reported 64,608 visits, up one per cent. Tourists posted 305,030 overnights in March with foreign and domestic tourists accounting for 145,231and 159,799 overnights, down eight and five per cent against March last year respectively. By the type of tourist facilities, hotels posted 242,807 tourist visits in the first three months this year, up one per cent against the same period last year. Resorts for children and the young reported the highest rise in the number of tourist visits which grew by 177 per cent to 3,589 visits. Spas posted 4,137 visits, up 67 per cent and hotel arrangements with all meals included reported 2,309 visits, up 46 per cent. Port for nautical tourism posted 2,079 visits in the first three months this year, up eight per cent against last year. 2. FINANCIAL MARKETS EXCHANGE RATE - HRK Curency Unit 16-May-2000 20-May-2000 % change USD 1 8,4197 8,6108 2,27 DEM 1 3,9356 3,9311 -0,11 ITL 100 0,3975 0,3970 -0,11 GBP 1 12,7324 12,7827 0,40 ATS 1 0,5593 0,5587 -0,11 CHF 1 4,9493 4,9564 0,14 JPY 100 7,6991 7,9848 3,71 EURO 1 7,6973 7,6886 -0,11 (Source: Croatian National Bank - HNB) MOST TRADED STOCKS AT THE ZAGREB STOCK EXCHANGE, MAY 15 - 19, 2000 Br. Dionice Zaključna cijena (HRK) Postotna promjena Promet (HRK) Postotna promjena 1. Varaždinska banka 305 5,17 242.971.091 21354,85 2. Zagrebačka banka O 1475 29,96 25.226.782 44,96 3. Pliva 536 6,14 3.042.895 57,83 4. Dalmatnska banka 210 20,00 2.188.198 780,50 5. Podravka 155 19,23 2.146.729 -9,02 6. Zagrebačka banka E 500 3,09 894.873 136,58 7. Riječka banka 130 13,04 616.478 1.870,09 8. Jadranturist 40 8,11 529.263 312,31 9. Končar EI 65 - 451.015 - 10. Riviera Holding 80 19,40 400.602 167,93 TURNOVER 279.319.666 1011,97 CROBEX 797,60 0,00 MOST TRADED STOCKS AT THE VARAŽDIN OTC MARKET, MAY 15 - 19, 2000 No Stock Final price (HRK) % change Turnover (HRK) % change 1. PIF Dom 23,10 14,81 730.304 9,94 2. HTC Tučepi 55,00 - 494.585 - 3. PIF Expandia 24,00 6,19 456.449 25,51 4. PIF Velebit 15,13 3,70 365.778 66,89 5. Slunjčica 13,00 - 322.426 - 6. PIF Sunce 15,01 16,48 227.049 405,04 7. PIF Slavonski 11,25 9,65 216.808 119,31 8. Ericsson Nikola Tesla 199,00 -0,54 203.714 -19,29 9. Imperial Rab 115,54 - 154.593 - 10. Bilokalnik 43,76 - 154.604 - TURNOVER 3.661.037 -17,78 VIN 429 7,06 SHORT-TERM SECURITY ISSUES Date Issue Maturity Amount subscribed (kn) Interest rate 05-17-00 HNB T-bills 35 - days 127.200.000 9,00% 05-17-00 HNB T-bills 91 - day 108.000.000 10,00% 05-17-00 HNB T-bills 182 - days 11.000.000 11,00'% Total amount of subscribed HNB T-bills as of May 17th, 2000: HRK 1.814.100.000 3. BANKING, INSURANCE AND FINANCE DALMATINSKA BANKA PUTS THE BULK OF ITS PROFIT INTO RESERVES In 1999, Dalmatinska Banka d.d. earned HRK172.9m. At the recently- held main assembly, the shareholders decided to earmark for risk provisions the bulk of the HRK11.2m after-tax profit and HRK3.1m - three kunas per share - will be paid out in dividend. by keeping HRK8.1m to boost its capital, the bank has confirmed its commitment to continuously strengthening its capital, protecting the interests of its shareholders and keeping its clients' confidence, says the bank. The bank's overall assets were at HRK2.2bn unchanged from their level in 1998. The structure of its assets has not changed in a major way, except for the fact that they were transferred from foreign banks to accounts held with HNB, the Croatian National Bank, as a result of the introduction of the mandatory foreign currency reserve requirement and a more intensive subscription of treasury notes . Dalmatinska Banka says the overall business environment was not conducive to a stronger lending activity, and a lot of the bank's effort went into debt collection and the collection of potentially risky placements. retail deposits last year represented the bank's major source of lending funds. In spite of the problems in the banking sector, these deposits were last year unchanged from the previous year and even showed a slight growth tendency in the first few months this year. Other major sources were loans received, which declined in the course of 1999 because the bank's short-term borrowing had shrunken. At the same time, the bank managed to service its debts related to foreign credit lines, but did not have access to additional foreign loans because of Croatia's low credit rating. In the upcoming period, the bank plans to build its own identity as a bank of national significance, equipped with sophisticated technologies and staffed with highly-educated employees. The bank continues to invest in new information technologies and preparations are under way for adding new, two-way services to the existing one-way on-line services. In addition, the bank will continue to expand its network of automatic teller machines and eft/pos terminals, as well as improve the existing products and services and introduce new ones. The bank is currently working to upgrade its current system of lending risk control and is also seeking to improve its system of other risk controls. In keeping with the trend towards a globalisation of the banking sector, Dalmatinska Banka is seeking a strategic partner that would strengthen its market position, boost its credit rating and speed up the bank's growth amid an increasingly competitive environment. More than a month ago, Reginvest d.o.o., a subsidiary of regent Pacific, the large Anglo-American group, became one of the major shareholders of Dalmatinska Banka after acquiring 9.9 per cent of its treasury notes. BANK AUSTRIA CROATIA - BEST PERFORMANCE SINCE ESTABLISHMENT The assets of Bank Austria Creditanstalt Croatia d.d. reached HRK1.33bn late last year, and the bank's net after -tax profit was at HRK30.6m. The bank management considers 1999 a successful business year in which the bank managed to confirm and strengthen its position on the Croatian market reaching the best results since its establishment, announced the bank. The number of the bank's clients increased from 7,500 in late 1998 to about 12,000 in 1999, and the number of accounts opened in the bank more than doubled, from 11,000 to 24,000, the bank pointed out. Furthermore, the bank expanded its operations by setting up a branch in Rijeka following branches in Zagreb, Dubrovnik and Zadar. A new branch is also expected to open in the centre of Zadar this July as well as in Split in September. Good performance was also recorded in Wuestenrot Housing Savings d.d., fully owned by the bank. The number of the housing savings contracts signed with Wuestenrot thus went up from 3,407 in late 1998 to 11,081 at the end of last year with savings deposits of HRK29m. MEDIMURSKA BANKA POSTS HRK10.28m PROFIT IN 1999 Medimurska Banka d.d. last year posted a net profit of HRK10.28m. The bank's board will propose to the shareholders' assembly that a total of HRK8.95m, seven per cent of the value of shares, should be paid out in dividend, according to Medimurska Banka's 1999 report. Besides the dividend, the bank will earmark HRK8888813,000 for reserves for its own shares, and the remaining HRK514,000 will be put into mandatory risk provisions. The payout of the HRK28-per- share dividend will - if the shareholders assembly, scheduled for June 5, accepts the board's proposal - start on June 15. Holders of ordinary shares will be paid in cash 50 per cent of the dividend value, while the rest will be paid in shares of Medimurska Banka. the bank's assets last year increased by one per cent to HRK1.12bn, and its overall revenues were at HRK81.25m down 3.4 per cent on the previous year. Mediumurska Banka has started looking for a strategic partner that could help it preserve its market position in the long run. DELAY LIKELY IN ISTARSKA BANK CAPITAL INCREASE Due to a delay in the audit report, the consortium for the Istarska Banka capital increase, which was established over a month ago at the time the bank had been blocked, is to ask the Croatian Government to extend the capital increase deadline by one month, and the Istarska County government committed to supporting the consortium. The consortium is preparing a promotion leaflet aimed at inviting all the stakeholders to get involved in the capital increase as much as they could. Ten strategic investors, eight foreign and two domestic investors, out of a total of 24 potential strategic investors the consortium had addressed, replied to the consortium and showed interest in the bank's capital increase. HOK IN FAVOUR OF ESTABLISHMENT OF CRAFTSMEN'S BANK In spite of the difficult economic situation, it is necessary to continue the activities to implement the Prva Obrtnicka Banka project, as well as carry out a thorough analysis of the sources of the bank's share capital of HRK40m necessary to set up the bank, concluded HOK, Croatia's chamber of craftsmen, on the occasion of its Wednesday session. Dissatisfaction with the existing credit line is due to generally high interest rates as well as long-lasting procedure from the moment of the submission up to the disbursement, which is, claim the craftsmen, due to commercial banks' bad lending policy towards crafts and small craftsmen. HOK has therefore initiated the establishment of its own financial institution, and a feasibility study into the bank's establishment, commissioned from EKU consultancy, was completed early this year. 4. ACTIVITIES OF GOVERNMENT, MINISTRIES AND STATE INSTITUTIONS PRIME MINISTER RACAN SAYS BOOSTING THE ECONOMY TO BE PRIORITY Economic and development-geared activities will top the government's agenda in the upcoming period, with a view to boosting the position of the country's economy, encourage investment in growth, new job creation, boosting exports, attracting investment, launching measures to fight the cash crunch as well as changes in the fiscal policy. As early as thursday, the government is likely to take a stance on the reduction in value added tax from 22 to 19 per cent, and on on the Statehood Day in Vukovar it will unveil measures designed to encourage the development of that region, prime minister Ivica Racan said on Monday at the promotion of the multi- media project entitled "100 Days of the Government". Racan confirmed the government was considering lowering the value added tax rate from 22 to 19 per cent. "Yes, we have, indeed, been looking into it and may come up with a specific proposal already at the government's next meeting on Thursday," the prime minister said. He said one of the major tasks concerned the return of refugees, which meant that not only houses but the entire economy had to be rebuilt. He said the government would pay special attention to some regions, among them Vukovar. He said the Statehood Day would in that town be symbolically marked with a day on work and the government would then unveil its comprehensive development plan. "100 Days of the Government" describe the government's achievements over the past 100 days and its plans for the next 100-day and 1000-day period. The multi-media project included a short video production, an address by prime minister Racan, and a special brochure and CD-ROM entitled "100 Days of the Government". A large audience of journalists attending the promotion at Banski Dvori, the government's seat, was joined by members of Racan's cabinet and later by all the government ministers. Among its major achievements over the past 100 days, the government has cited a democratisation of the Croatian society, a consolidation of the economy and its commitment to repay, by the end of the year, all debts incurred by the previous governments, recognising tourism and agriculture as the country's major resources and joining European and Transatlantic integrations. These achievements are described in more detail in five separate parts of the video - economy, national security, media, society and foreign policy. By the end of the year, the government has pledged to - among other things - prepare fiscal measures to attract foreign investors and incentives for entrepreneurs, set up a state treasury and stabilise the banking system. In addition to a number of measures aimed at boosting the economic activity, prime minister said the state portfolio would be reviewed, i.e. those companies in which either a majority or a minority stake is held by the state. These should be consolidated, taken to the next stage of privatisation, while at the same time the accountability of corporate management and supervisory boards should be strengthened, Racan said and added the draft measures would be revealed next week. The prime minister also announced that some economic sectors would be reformed, such as the energy sector. The government used its first 100 days in office to design a new structure of the state administration, decentralise and strengthen local self-administration bodies, and reform the systems of national security, defence and the interior. Racan said a deadline for pension reform would soon be set and a proposal for the reform of the health and education sectors would soon be unveiled. The society will be further depoliticised, said Racan, with an emphasis on the separation of the executive power from the economy and the banking business, depolitisising the military, the police and the media. Out goal is to take this country back to normal in order to integrate it as soon as possible in Europe, the prime minister concluded. The multi-media presentation of the first 100 day of the government was designed by Premisa marketing agency and its visual identity was designed by two authors of Bozesacuvaj. The concluding message of the video presentation is condensed in the slogan:" Co- operate with the Government - the Government is a good guy." GOVERN., TRADE UNIONS AND EMPLOYERS DISCUSS MEASURES FOR THE NEXT 100 DAYS Last week, the Government presented to the trade unions and employers a set of measures aimed at stimulating the economic growth and creating new jobs in the next 100 days. Ivica Racan, the Croatian Prime Minister, and his close associates held a meeting with representatives of five trade union federations and the Croatian Association of Employers. The participants at the meeting announced measures for stabilising the situation in state-owned companies and changing fiscal policy. "The Government will classify companies in accordance with the share of state ownership and will then, as a serious employer, accept its obligations", said after the meeting Davorko Vidovic, the minister of labour and social welfare. As part of fiscal reform, the Government will propose modifications of the profit and income tax with the view to stimulating employment and eliminating grey economy. According to Vidovic, amendments to labour laws will this month appear on the agenda of Business and Social Committee and its partners will have to make great efforts to reach an agreement because of opposed interests. "The trade unions asked the Government to take measures for new development, employment and regular salaries", said Vitomir Begovic, secretary general of the Croatian Association of Independent Trade Unions. He stated that Bechtel, an American company, intended to employ Turkish workers skilled in working on special machines, since Bechtel signed with the former Government deals without a clause guaranteeing the employment of Croatian workers. The Trade Unions asked the Government to propose to Bechtel amending the contract with the view to stimulating the employment of Croatian workers whose re-training should be ensured by the Croatian Labour Office. Zeljko Ivancevic, the head of the Croatian Association of Employees, said that the set of measures, including the reform of the fiscal system and the promotion of investment, exports and employment, should stimulate development rather than only save unsuccessful companies. GOVERNMENT BACKS INA'S LOAN APPLICATION In an open part of its session on Thursday, the government backed INA's application for a foreign loan. The US$206.4m loan will be used to fund the purchase of crude oil and additives. The loans mature within 120 days and come at the rate of Libor plus 1.5 per cent (for US$200m) and Libor plus two per cent (for US$6.4m). In order to ensure a timely payment for the supply of crude oil through INTER Ina London, the government gave INA the green light for the issue of promissory notes worth US$60m. GOVERNMENT: THE 22 PER CENT VAT RATE WILL NOT CHANGE The 22 per cent value added tax rate will not change, but the government will propose changes to the law under which the deadline for the payment of value added tax would be extended from the 10th to the last day of a given month, the government decided at the closed meeting held on Thursday. In addition, the government drafted proposals for new excise taxes for oil derivatives, which would send the price of petrol and diesel up 29 and 13.7 per cent respectively, while the price of heating oil would remain unchanged. Higher excise taxes would also apply to cigarettes, coffee, beer, and cars. On the other hand, contributions paid on wages (not from wages) would go down by two percentage points for both health and pension insurance, which would reduce the cost of labour, Slavko Linic and Mato Crkvenac, respective deputy president of the government and finance minister, said after the meeting. the government sent 11 bills to the parliament, related to the fiscal policy and the review of corporate privatisation. Crkvenac explained that reducing VAT rate would not be an adequate measure at this point, and Linic pointed out that it would mean reducing taxes in consumption rather than in economic activity. When it comes to VAT, Crkvenac thinks the extension of the payment deadline will have a major positive impact on enterprises because it translates into over one billion kunas more in their annual cash flow. On the other hand, higher excise taxes would make an additional HRK2.5bn flow into the state coffers on the annual level - HRK1.5bn this year. he said the higher excise taxes would send the price of cigarettes, alcohol and coffee up by ten per cent, whereas the price of beer should not be affected. In cars, the new excise taxes would from now on be calculated based on the value of the car rather than its power. The calculations show the rise in excise taxes is likely to lead to a 1.7 per cent rise in the cost of living. However, Crkvenac said there was no reason for other prices to go up, and promised tough action against any party that may attempt to abuse the rise in excise taxes. In his words, the cost of labour is a bigger burden on enterprises and some products than is the price of energy. He said once the price of a litre of unleaded petrol and diesel rose to 6.48 and 5.07 kunas respectively, it would still be the lowest among the neighbouring countries. Crkvenac and Linic said the most important goal at this point was to spur growth, reduce the liquidity crunch, and create jobs. In order to achieve this, it is critical to reduce the cost of labour and enable companies to invest and create jobs. The lowering of contributions by two per cent should prove to be conducive to these objectives - the respective rates of nine and 10.75 per cent for health and pension insurance would go down to seven and 8.75 per cent. According to Crkvenac, this would bring the enterprises a multiple benefit: they would be left with more money to invest, create jobs and would be altogether strengthened. Crkvenac calculated that every company will be left with about 200 kunas more per average wage of HRK3,300. Lowering the rate would also contribute towards a financial consolidation of the state balance because these contributions were difficult to collect. Under the new law, the tax authority becomes responsible for the collection of these contributions, which is expected to improve their collection. The health and pension funds would be guaranteed their income because they would be reimbursed directly from the state budget for the money they lost in lower contributions. Regarding the fiscal package, the government proposed changes in income and profit taxes under which all retained profit would be exempt from paying those taxes, and the base would be reduced for every new recruit. The bills were sent to the parliament for accelerated procedure, which means that - if they are passed - the VAT Act would come into force on June 1 and the new excise taxes would apply as soon as the law comes into force. At the same meeting, the government drafted and sent to the parliament a bill on the review of privatisation. Under the bill, the review would be carried out by a special state auditor's office. BOARD OF THE CROATIAN PRIVATISATION FUND REJECTS BIDS FOR PRIMOSTEN The board of the Croatian Privatisation Fund (HFP) failed to accept any of the three bids for the purchase of the majority block of shares of Primosten tourist company. The Croatian Privatisation Fund decided to continue individual talks with bidders - Primosten nautical club, Gruber Reisen and Biser Luka - in order to redefine buying and selling conditions or repeat the tender. At the same time, the Privatisation Fund accepted the proposal for the rehabilitation of Nama. The Fund will transfer the entire Nama's portfolio to Privredna Banka Zagreb bank which will be obliged to pay two salaries to Nama workers. Privredna Banka Zagreb bank is obliged to rehabilitate Nama and ensure its regular performance with the existing employees in the next five years. The board of the Croatian Privatisation Fund decided to invite bids for 94.03 per cent of Pazinka's equity at a starting price by 30 per cent lower than the nominal and the application period of eight days from issuing the tender. Likewise, the Fund's board approved loans for the preparation of this year's tourist season to Primosten, Crikvenica-based Jadran and Dubrovnik-based Lopud and Mlini hotels. The Fund also approved buyers' request for extending the deadline for the payment of the remaining debt in accordance with the contract of sale of Trudbenik's shares. Buyers demanded extending for six month the deadline for paying the annuity. Based on the decision of the Croatian Government on the issue of shares of companies controlled by the Croatian Privatisation Fund, the board of the Croatian Privatisation Fund adopted the list of shares whose nominal worth reaches HRK739.8m. The Fund's board is informed that criminal charges have been pressed against some people on top positions in partnerships from the Fund's portfolio. The Croatian Labour Office accepted the programme which involves taking care of redundant workers of the Croatian Privatisation Fund and received a list of companies included in the portfolio of the Croatian Privatisation Fund, Pension-Insurance Fund and the State Agency for Bank Rehabilitation. 5. COMPANIES INTERCREDIT'S SOLVENCY ASSESSMENT DOWN IN APRIL The average solvency assessment for Croatian companies was 422.8715 points in April, down 10.0471 points against the previous month. According to Intercredit, Zagreb-based company for the assessment of credit rating and the collection of payment in Croatia and abroad, all the categories were unfavourably assessed. State-owned companies ranked last with 495.6522 points. By ownership structure, state-owned companies ranked last with 495.6522 points and were followed by companies with mixed ownership which got 435.5556 points. On the other hand, privately owned companies ranked first with 418.3708 points. By the type of activities, Intercredit gave the highest assessment reaching 415.0000 and 419.1892 points to service and trade companies respectively. Manufacturing companies, on the other hand, ranked last with 428.7574 points. The largest number of Intercredit's clients last month were the Austrians who accounted for 33.8 per cent. They were followed by 25.2 per cent of the Germans, 19.1 per cent of the French and 11.3 per cent of domestic clients. According to Intercredit, orders for collection of payment posted a fall in April but the amounts of payments and the percentage of solved cases remained the same. By the total number of cases, claims against trading companies ranked first accounting for 52.89 per cent and were followed by manufacturing companies which accounted for 31.85 per cent. Service companies accounted for the remaining claims. INA SEEKS STRATEGIC PARTNER FOR CROSCO OIL SERVICES INA oil company has recently launched a tender for the sale to a long-term strategic partner of a stake of between 50 and 100 per cent of the equity of CROSCO oil services company. The Croatian company is thinking of selling a part of the stake in CROSCO, which employs about 2,000, and deals with drilling, overhaul, equipping and exploring wells and other oil-related services. INA oil company, which holds a 100 per cent of CROSCO's equity, wants to see CROSCO remain in the long term a Croatian company registered in Zagreb, with the strategic investor committing itself to saving jobs and protecting the environment in the sites CROSCO will continue to operate on for many years to come. The idea behind the search for a long-term strategic investor is to ensure a long-term survival and growth of the company. CROSCO has a substantial capacity for drilling, ship overhaul and special operations. It also has an international experience, but its prospects in Croatia are modest, to say the least, says INA. The cost of the transaction must be aligned with INA's key objectives, but INA plans to keep a stake in CROSCO to ensure that the major decisions pertaining to the company can not be made without INA's approval. VIKTOR LENAC POSTS HRK10m NET PROFIT Viktor Lenac, the Rijeka-based shipyard, in 1999 posted a net profit of HRK10m on an overall income of HRK365m, up 5.4 per cent on the previous year. The shipyard's board projects this year's operating income to exceed US$60m, ie. to be about 20 per cent higher than last year's. The better financial results are planned to be achieved by boosting ship repair activities - the shipyard's core business - and strengthening its presence in the market of more complex repair work on vessels and off-shore facilities, as well as building special-purpose ships. In order to meet these objectives, the company is building a new dock, whose installation will start in a few days. the dock is funded by a few leading international financial institutions. The increased business will create 230 new jobs, mostly in production, which will put the shipyard's overall staff at 1,105 by the end of the year. CONSTRUCTION OF PLOCE PORT RO-RO TERMINAL CLOSE TO COMPLETION The construction works at the port terminal for domestic and international ferry traffic, part of the retrofit and reconstruction of the port of Ploce, a town at the Neretva delta, are being brought to completion. Although, due to technical reasons, the works are one month late, the new modern ro-ro terminal will be completed by the end of May or early next month. The Ploce port management has allocated HRK14m for the construction of the project, the funds having been ensured by the World Bank through favourable international loans. The port works are being carried out by the workers of Luka Ploce - Gradnja and the company's subcontractors. In addition to the modern terminal and the port administration building, the terminal will also be provided with full infrastructure and other facilities. Ships of 125 m in length and 9 metres in width and with a draught of 19 metres will be able to dock at the port. The terminal also has an area reserved for yachts and other luxury ships, which will contribute towards the development of nautical tourism of Ploce. It has been announced that the Ploce-Ancona line will soon be established, which is of great interest for business people, especially those based in Bosnia-Herzegovina. BRODOSPLIT SIGNS CONTRACT ON THE BUILDING OF THREE OIL TANKERS Brodosplit shipyard has concluded with Wallis Trading, a company registered in Liberia, the contract on the construction of three US$33m tankers with 40,000 to 45,000 tonnes tonnage. The contract, which is of great importance to Brodosplit, was signed in Paris last weekend. Brodolsplit had first made a deal with Newport, an American shipyard, but decided to conclude a contract with Brodosplit since in the meantime Newport reoriented its production towards military purposes. Given that the American shipyard has already purchased the largest part of the necessary equipment for the construction of the three tankers, this equipment will be sent to Split. In accordance with very favourable terms of payment agreed between Wallis Trading and Brodosplit, Brodosplit will receive half of the agreed sum during the construction and the rest after the tankers have been delivered. Likewise, the contract envisages US$500,000 bonus per ship if the delivery is made in time or before the deadline. The construction of the first tanker is planned for December this year and the delivery is planned for March 2002. The other two tankers will be delivered in July and December 2002. As part of its business policy aimed at increasing the number of ships built per year in its slipways, Brodosplit offered favourable terms. This series of tankers is a turning point in the new policy in the Split-based shipyard committed to producing at least six new ships every year. In accordance with the EU system of subsidies, the annual construction of six ships will enable Brodosplit to make a profit and obtain the Government's subsidy reaching ten per cent of a ship's price. RIJEKA TO GET NEW BUSINESS AND TRADE CENTER The city of Rijeka government and ZTC, a Rijeka-based company owned by Austria's Universal, on Monday concluded an agreement under which ZTC purchased an 8,100-square-meter building site to develop a new shopping mall in Zvonimirova street. The mall will comprise business premises, a hotel, catering facilities, service facilities and a public garage for about 1,000 vehicles. The project, worth a total of over DEM100m, is due to be completed in four years. Under the agreement on the purchase of the DEM3.2m site, ZTC undertook it to build the surrounding traffic and utility infrastructure. Vojko Obersnel, the mayor of Rijeka, said the project was of particular importance for the city of Rijeka because it would create jobs and a whole part of Rijeka would be developed. Speaking on behalf of the Austrian investors, Gerhard Hoffmann, chief executive of ZTC, said he was adamant that that project would be one of many to be developed by ZTC in Rijeka and Croatia, and added that his conviction was strengthened by the positive political and economic climate created in Croatia this year. PROTOCOL ON BENETTON PRODUCTION START GETS SIGNED Representatives of "Benetton-Croatia" d.o.o., Osječko-Baranjska County, Slavonska Banka and Hypobank, Metalska Industrija Osijek (MIO) d.d. and Osijek's Free Zone signed on Wednesday a protocol on starting the Benetton production in Osijek. Benetton is expected to directly employ at least 120 workers, between one and two thousand people would be working for local textile companies cooperating with Benetton. Preparation works have already started in the plant, currently owned by MIO d.d., in the Free Zone. Benetton intends to start production in early June, together with its cooperating companies, said Michele Sgobbio, general manager of Benetton Croatia. Since the plant is encumbered with the Slavonska bank's mortgage as well as a priority mortgage with HBOR, Croatia's bank for reconstruction and development, in order to provide a security for MIO's loan of HRK17m, it was agreed that HRK8.5m of the loan would be repaid by Benetton, HRK6m by the county, and Slavonska Banka HRK2.5m. The one-term payment, which will be applied, will avoid paying interest rates and increase in costs of the project ofDEM1.5m. The implementation of the project will be able to start after the adoption of the protocol by the county assembly. A huge number of applications have been sent for the advertised job positions. BAT CONTINUES INVESTING IN TDZ British American Tobacco (BAT) decided to continue investing in Tobacco Factory Zadar (TDZ). "As part of its investment in TDZ, BAT will inject HRK200m in the Zadar-based factory," said last week Anne Johnson, the chief executive of TDZ. According to BAT's announcement, these funds will be used to finance the reconstruction and expansion of TDZ, the purchase of modern equipment and machines for the preparation of tobacco, manufacture and packing of cigarettes and storage of raw materials and finished products. According to BAT, TDZ's employees will continue working and a considerable number of jobs will be created. In accordance with its business plans, BAT intends to manufacture well-known international as well as new Croatian cigarette brands. In order to ensure a long-term investment in Slatina-based Duhan tobacco factory, BAT will use Croatian tobacco for Croatian cigarette brands which will be produced in TDZ. SOLUTION FOR NAMA: TRANSFER OF OWNERSHIP, HRK61m WRITTEN OFF Talks held with representatives of the employees and trade union of Nama, a Zagreb-based chain of stores currently facing bankruptcy, resulted in agreement that Privredna Banka Zagreb (PBZ) should sign an agreement with HFP, Croatia's privatisation fund, on the acquisition of stakes in Nama on condition that the agreement reached with the employees, trade union and the Nama debtors should be fully respected. The Government will write off Nama's liabilities towards the commodity reserves administration of HRK61m, said Goranko Fizulic, Croatia's minister of economy, to the government members on Thursday after the meeting with the representatives of Nama whose workers organised a protest before the Government on that day. The mentioned decisions will be implemented after the Government passes a decision on the transfer of the stake and subsequent to the approval of PBZ. Fizulic said that he had contacted Bozo Prka, president of the PBZ management board who generally agreed with the proposal. Lending terms for the payment of two salaries to Nama workers still remain unclear, and workers should discuss the issue with the bank itself, claimed Fizulic. Pointing out that the proposals try to meet the workers' demands, prime minister Ivica Racan and Slavko Linic, vice- president of the Government, expressed their reservation towards the proposed solutions. The Government will protect the workers, but the implementation of the project is far from being realistic,and that is another issue, said Linic. Racan's message to the workers is that the proposed solutions also involve their part of the responsibility, due to which workers will no longer be able to protest against any problems that may arise in Nama in the future. DURO DAKOVIC MONTAZA POSTS HRK874,753 NET PROFIT Duro Dakovic (D.D.) Montaza, a part of Duro Dakovic holding, posted HRK874,753 net profit last year, up 72.4 per cent against the previous year, announced Varazdin Securities Market. Participants at the company's General Assembly have recently decided to allocated five per cent of the profit or HRK43,700 for legal reserves, while 95 per cent of the profit or over HRK831,000 will be paid to the shareholders as the dividend. Overall revenue of D.D. Montaza group fell by five per cent to HRK238.5m and the revenue of the parent company posted HRK150.6m, down 12.8 per cent. This fall resulted from declining investments in the domestic market. Last year, foreign markets, especially the German and the Slovenian, accounted for 60 per cent of D.D. sales. Thermo-electric power plants accounted for most of sales in Germany. Domestic and foreign building sites accounted for 93.2 and 92 per cent of planned working hours. Last year's actual operating expenses posted a five per cent drop against planned expenses due to a large number of sick leaves and the fact that facilities were often occupied. Actual direct and overhead costs were close to planned values. Actual financial costs exceeded projected costs due to general liquidity crisis in the domestic market and the problem with collection of DEM4m for works done on Plomin II. During the course of last year, the plan of investment purchases was not fulfilled since HRK2.4m worth purchases were twice lower than the amortisation. Last year. D.D. Montaza launched a project of modernisation and expansion of information system which is expected to be completed by the end of this year. By the end of last year, the number of staff was reduced to 819 and redundant workers are expected to be taken care of this year. At the same time, workers are being trained for building sites in Germany, Scotland and Ireland. In order to satisfy current demands in the market, certificates have been renewed in accordance with ISO-9002 standards in Croatia and Germany and the testing of welder has been carried out in accordance with ACME standards for the purpose of building sites in Scotland. 6. INTERNATIONAL COOPERATION CROATIA AND BRITAIN SIGN MEMORANDUM ON TOURISM COOPERATION Pave Zupan-Ruskovic, Croatia's minister of tourism, and Janet Anderson, British minister of tourism, film and media, signed in London on Wednesday a bilateral state Memorandum on Agreement and Cooperation in Tourism. The agreement, proposed by the Croatian side in February 1999, is to facilitate tourist visits between Croatia and Britain, help exchange tourism publications and encourage the development of favourable working conditions for companies and groups working in the field of tourist project management and sustaining. At a conference, organised by Stephenson Harwood, a London-based law firm, Pave Zupan-Ruskovic presented the programme of privatisation in tourism. The minister said that in the next two or three years the Croatian government intended to sell 43 tourist companies presently owned by the state with a stake of at least 25 per cent. It has therefore been proposed to the Croatian Privatisation Fund that the companies' debts should be paid by the state, while the investor would pay the market price for the asset to the state. This would bring a greater inflow for the state than the amount of the debt to be paid. The second major problem is the requirement that the investor should guarantee employment for at least five years, said Pave Zupan-Ruskovic claiming she was in favour of reducing the period to one year at the most. Arguing that the rise in British booking for Croatia in comparison with last year is due to political changes in Croatia, minister Zupan-Ruskovic rejected the opinion that the booking increased thanks to the lack of a crisis similar to Kosovo last year. According to British travel agencies, 21,500 British tourists booked their holiday to Croatia up to May 15 this year, which is to be compared to 19,700 recorded up to May 15 last year. The number of British tourists in Croatia in 2000 is estimated at 70,000 by the London office of HTZ, Croatia's tourist board, which would match the 1998 figure of 68,288 tourists from Britain. The number of arrivals of British tourists fell 25 per cent in 1999 on 1998. AMCHAM DELEGATION MEETS MESIC The delegation of the management board of AmCham Croatia, the U.S. chamber of commerce, talked in Zagreb on Wednesday with president Stjepan Mesic on increasing U.S. investments in Croatia. "We talked about the moves we had taken as a chamber and as individual companies, as well as about our ideas how to increase private investments and boost exports. We also discussed attractiveness of Croatia for foreign investors", said Michael Glazer, president of the chamber president. AmCham Croatia is a non-profit, non- government and voluntary organisation specialising in promoting the cooperation of U.S. companies and investors, already present in Croatia, with Croatian companies, government and other institutions. AmCham Croatia, which was established in 1999 by 20 companies, including American Express, Coca-Cola Adria, Bechtel International INC, McDonald's Croatia, Microsoft Croatia, today has more than 120 companies. CROATIAN BUSINESS PEOPLE WANT TO DO BUSINESS IN KOSOVO Great interest of Croatian companies in doing business in Kosovo with the Kosovo companies was confirmed in HGK, Croatia's chamber of commerce, on Wednesday when leaders of as many as 80 Croatian companies met with representatives of 90 companies from Kosovo. Many Croatian enterprises are already taking part in the reconstruction of Kosovo, where gains are still larger than risks, said Nadan Vidosevic, president of HGK, announcing the establishment of a representative office in Kosovo which would be in charge of economic matters. Kosovo is cooperating mostly with Turkey, Greece and Slovenia, and business with Croatia is of lower scale at the moment. AGENCY FOR WESTERN SLAVONIA ECON. DEVELOPMENT OPENS IN OKUCANI The opening ceremony of LEDA, agency for local economic development, the establishment of which was supported by UN agencies, took place in Okucani on Wednesday. LEDA, whose task is to encourage economic development of western Slavonia and return of the displaced, will take care of the overall development of places which gravitate towards western Slavonia and were much destroyed during the war. The agency will create favourable business environment through providing training, workshops, lending schemes, support to economic infrastructure and ensuring projects for sectors with high economic and employment potential. With its activities based on agriculture, manufacturing industry, as well as small and medium-sized businesses, the agency will try to find sources of finance to implement quality programmes and ensure markets for particular products. The founders of LEDA are Brodsko- Posavska and Pozesko-Slavonska counties, the towns of Pakrac, Lipik and Novska, Dragalic, Gornji Bogicevci, Okucani, Stara Gradiska, Velika and Jasenovac municipalities, as well as the Chamber of Commerce, Slavonski Brod's Centre for the Technological Development and the Institute for International Affairs. 7. FAIRS AND EXHIBITIONS MEDICINA I TEHNIKA FAIR WITH DENTAL 2000 EXHIBITION AT ZAGREB TRADE FAIR Medicina i Tehnika, international fair of medical, laboratory and dentistry equipment and pharmacy, one of the longest-standing and the most important specialised exhibitions of the Zagreb Trade Fair (ZV), will be held between May 24 and 27. 370 exhibitors from 23 countries will present state-of-the-art technology and equipment for health care at the area of 11,000 square metres. 12,000 visitors are expected at the fair. ITTF 2000 TOURISM FAIR AND VINOVITA 2000 WINE FAIR END ITTF, the 12th international business tourism fair and Vinovita, the 6th international fair of wine, wine-growing business and equipment, were held at the Zagreb fair from May 10 through 13. ITTF, the most important tourism manifestation in Croatia, featured 140 exhibitors from Croatia and abroad. Participants at numerous conferences, workshops and round tables agreed that 20 to 25 per cent increase in tourist turnover could be expected this year. At the Tourist Forum, held at the Fair, experts discussed trends in global tourism and the development of tourism, especially now when the interest for Croatian resorts is growing. ITTF and Vinovita were held at the same time because tourist consumption is related to the quality of Croatian wines and their presentation. Vinovita spanned 4,500 square meters and featured wines of 137 domestic and 45 foreign producers. Vintners and winegrowers were taste-testing wines for four days and the international commission tested their quality in accordance with international standards. 463 Croatian and 11 foreign wine samples were tested this year and the best wines were awarded with medals. Vintners and winegrowers discussed their problems at various conferences. Bozidar Pankretic, the minister of agriculture and forestry, announced that the Government would take measures to improve the situation in wine growing and stimulate its development, especially regarding the planting of new wineyards. OSIJEK EXPO 2000 FAIR CLOSES IN OSIJEK Osijek Expo 2000, the 8th international reconstruction fair, closed in Osijek on Monday. The fair, which had opened on May 10, saw the participation of 70 exhibitors from Croatia, Italy, Romania, Hungary, Bosnia-Herzegovina and Yugoslavia, which displayed products of the construction industry, machines, equipment, agriculture, crafts and ecology. Osijek's twin cities, Vicenza, Tuzla, Ploesti and Subotica, promoted their economies, and business talks were held between companies from Slovenia and Osjecko-Baranjska county. Spokesmen for Osjecki Sajam fair company said the lower exhibitor turnout compared to last year's event was due to the difficult economic circumstances in the region and announced they would hold a press conference to present their thoughts on the future of the fair. 8. SUNDRIES TRADE UNION CALLS ON GOVERN. TO KEEP TO AGREEMENT ON PRIVATISATION OF UTILITIES If the government fails to keep to the signed agreements on the privatisation of utilities, such as INA or HEP, Croatia's trade union of energy, chemistry and non-metal is prepared to apply all kinds of protests, including road blockades, announced Ivan Tomac, president of the trade union, at the press conference held on Thursday. An annex to the agreement ensures a preferential treatment of the workers in the subscription of the shares, and obliges the Government to maintain the level of employment while selling companies and redirect the funds obtained in the sale to employment incentives. A similar agreement has been signed on the privatisation of Petrokemija. Privatisation and restructuring should no longer be decided about in the offices of a narrow circle of government officials, warned Tomac. The union has recently sent the Government draft amendments to the Law on Financial Transactions, aimed at enabling companies with blocked accounts, due to preliminary bankruptcy proceedings, to continue business. The Government should by decree authorise official receivers to issue payment orders so as to prevent loss of markets before the bankruptcy proceedings start, claims the union. TRAIN DISPATCHER UNION ANNOUNCES RAILWAY STOPPAGE ON MAY 23 SPVH, the train dispatchers' union of Croatia, announced on Thursday its decision to fully stop railway traffic between 10 and 11 a.m. on May 23. due to unresolved problems of its members. SPVH also announced that on that day train tickets would not be available at railway stations in which they are usually sold by train dispatchers. SPVH demands that the train dispatchers' working time should be defined and include a paid 30-minute break. The union also demands overtime work should be abandoned as a regular practice in order to increase railway safety presently in danger due to the reduction in the number of dispatchers. The union points out that talks on reductions in the number of dispatchers were ruled out as long as new technological solutions for their job are not provided. The union also requires the cancellation of the ranking of dispatchers on the grounds of their being discriminatory. The union calls for more humane working conditions, because, according to the announcement, some dispatchers still work in container stations or railway stations without drinking water.