BUSINESS NEWS BULLETIN, NO 168

BUSINESS NEWS BULLETIN No 168 April 8th - 14th, 2000 CONTENTS: ? RETAIL PRICES UP 0.8 PER CENT IN MARCH 2 ? PRICES OF INDUSTRIAL PRODUCTS UP 1.4 PER CENT 2 ? JOBS KEEP DROPPING IN FEBRUARY 2 ? AVERAGE NET SALARY IN JANUARY HRK3,191 2 ? FINANCIAL MARKETS 3 ? CENTRAL BANK'S COUNCIL REVOKES INTERIM ADMINISTRATOR OF ISTARSKA BANKA 4 ? VIDULIN ON ISTARSKA BANK 4 ? DETAILS OF THE SALE OF RIJECKA AND SPLITSKA BANKA AGREED 4 ? SPLITSKA BANKA BANK MADE HRK38.12M NET PROFIT LAST YEAR 5 ? ZAGREBACKA BANKA TO ALLOCATE HRK58.6M FOR DIVIDEND PAYOUT 5 ? ZAGREBACKA BANK'S GDRs LISTED AT FRANKFURT STOCK EXCHANGE 5 ? MERKUR OSIGURANJE AWARDS THE BULK OF PROFIT TO POLICY HOLDERS 5 ? IVAN VRLJIC APPOINTED PRESIDENT OF THE BOARD OF LIBERTAS INSURANCE COMPANY 6 ? ZAGREB STOCK EXCHANGE TURNOVER REACHES HRK419m 6 ? VTV RECORDS FIRST QUARTER TURNOVER OF HRK117.3m 6 ? GOVERNMENT LAUNCHES MEASURES AIMED AT DEBT SETTLEMENT 6 ? GOVERNMENT HOLDS CLOSED SESSION 7 ? COMMITTEES APPROVE CENTRAL BANK'S FINANCIAL PLAN 7 ? TISUP ISSUES ANNUAL REPORT 7 ? HFP SURPRISED BY HZMO'S REFUSAL TO PUT STATE-OWNED PORTFOLIO UNDER ONE UMBRELLA 8 ? HFP: AGREEMENT ON SALE OF 5.02 PER CENT STAKE IN ZADAR TOBACCO FACTORY GETS SIGNED 8 ? SOLVENCY IN MARCH NEARLY UNCHANGED AGAINST FEBRUARY 8 ? SANJIN KIRIGIN HEADS RIJEKA-BASED OIL REFINERY, CAVRAK SISAK- BASED OIL REFINERY 9 ? HEP TO REQUEST AVERAGE 25 PER CENT INCREASE IN HOUSEHOLD ENERGY PRICES 9 ? PROJECTION OF SALES OF KONCAR PRODUCTS AND SERVICES TO REACH HRK1.46bn 9 ? BUSINESS RATIONALISATION BRINGS PROFIT TO ELEKTRODA 10 ? OLT APPOINTS NEW PRESIDENT OF THE BOARD 10 ? BANKRUPT SAVRIC TO SELL ITS JANKOMIR PRODUCTION PLANTS 10 ? BELJE SUPERVISORY BOARD: FUTURE WITH GOVERNMENT SUPPORT 10 ? WORKERS OF PIK VRBOVEC LIFT ROAD BLOCKADE 11 ? LUKSIC GROUP WINS 80 PER CENT VOTES AT PLAVA LAGUNA GENERAL MEETING 11 ? AMFORA FOUND TO OWE ZAGREBACKA BANKA AN UNDISPUTED DEM20m 11 ? DALMA MALOPRODAJA'S BANKRUPTCY ESTATE SUFFICIENT TO COVER DEBTS 11 ? THREE LARGE WHOLESALE MARKETS TO OPEN IN THE COURSE OF THE YEAR 12 ? IMF AND CROATIA NEGOTIATE ECONOMIC ASSISTANCE PROGRAMME 12 ? NEVEN MIMICA IN TALKS WITH EBRD DELEGATION 12 ? FIZULIC SAYS TURKEY IS INTERESTED IN INVESTING IN CROATIA'S TOURISM 12 ? EUROSTAT MISSION TO HOLD FIRST MEETING WITH STATE BUREAU OF STATISTICS 13 ? CROATIAN AND UKRAINIAN EMPLOYERS SIGN CO-OPERATION AGREEMENT 13 ? SPRING AND CONSTRUCTION TRADE FAIRS OPEN IN RIJEKA 13 1. ECONOMIC INDICATORS RETAIL PRICES UP 0.8 PER CENT IN MARCH Retail prices in Croatia, including those of seasonal products, increased 0.8 per cent in March on the previous month, against a 0.6 per cent rise in the cost of living, according to the State Bureau of Statistics. A record rise was reported in manufacturer prices of industrial products, up 1.4 per cent on February. Compared to the equivalent month a year earlier, retail prices rose 5.1 per cent in March, and in the first quarter this year they increased 4.8 per cent on the first quarter last year. In March this year, the cost of living increased 3.9 per cent on last year's March and in the first quarter this year it rose 3.8 per cent compared to the corresponding quarter last year. The rise in retail prices in March against February reflected a one-per-cent growth in commodity prices and a 0.3 per cent rise in the price of services. In the year to the end of March, retail prices, including seasonal products, rose at the rate of 0.629 per month, adding up to a total increase of 1.9 per cent. According to the statistics, the cost of living rose at the average monthly rate of 0.728 per cent, adding up to a total of 2.2 per cent in the first quarter. PRICES OF INDUSTRIAL PRODUCTS UP 1.4 PER CENT Manufacturer prices of industrial products rose 1.4 per cent in March against the previous month and were up 10.2 per cent on last year's March, according to the data of the State Bureau of Statistics. In the first quarter this year, manufacturer prices of industrial products were 8.5 per cent higher than in the corresponding period last year. The relatively high monthly growth in manufacturer prices, which was undoubtedly reflected in the rise in retail prices, was mostly impacted by the reported 18.9 per cent rise in the price of oil derivatives and a 9.4 per cent rise in the crude oil and natural gas. By main industry grouping, the price of energy rose 3.7 per cent in March against February; capital products were up 1.2 per cent; non-durable consumer products rose 0.8 per cent; intermediaries were up 0.6 per cent and durable consumer goods increased 0.3 per cent. According to the national classification of economic activity, a record price rise - 7.9 per cent - was reported in the mining and digging industry against a 2.6 per cent rise in the processing industry. Ten groups of activity in March reported a rise in prices. Production of oil derivatives reported a rise of 18.9 per cent; crude oil and natural gas reported a rise of 9.4 per cent; the manufacturing of vehicles, not including shipbuilding, prices were up 2.7 per cent; radio and television sets and other communication devices were 2.6 per cent more expensive; and the price of metals was up 1.9 per cent. Chemical products were 1.4 per cent more expensive; food and beverages were up 1.3 per cent; machines and devices were up 1.1. per cent, electrical machines and apparatuses were 0.4 per cent more expensive, and prices in the fur processing and dying industry were up 0.1 per cent. At the same time, the supply of electricity, gas and water in March reported a 15.2 per cent drop in prices; rubber and plastic products were 1.9 per cent cheaper; leather and footwear products were down 1.8 per cent; non-metal mineral products were 0.6 per cent cheaper; tobacco products dropped 0.4 per cent and wood processing, furniture excluded, reported a 0.2 per cent drop in prices. In the remaining nine groups of activity, prices of industrial products remained unchanged in March against February. JOBS KEEP DROPPING IN FEBRUARY Employment keeps decreasing in Croatia. After a fall in employment of 0.6 per cent in January, a decrease of 0.2 per cent on the month before, was again recorded in February. The State Bureau of Statistics recorded a total of 1,292,908 employed persons in Croatia in February. At the same time, the number of unemployed persons went up 1.3 per cent reaching 355,272. The rate of unemployment, calculated as a proportion of the number of the unemployed in the total working population (1,646,802), amounts to 21.6 percent. Preliminary statistics show that 1.008,101 persons were employed with legal entities in February, a drop of 0.2 per cent on January. Crafts and free professions were the only fields which saw a 0.4 per cent increase in employment which went to 197,885. According to the list of working insurees provided by the Croatian Pension Fund, the number of working insurees fell to 86,922 in February, a decrease of 1.8 per cent. Figures on employment in legal entities in the first two months of the year show that hotels and restaurants recorded the largest drop in employment, 5.7 per cent, and a considerable number of job cuts was also recorded in construction, 5.4 per cent, as well as retail and wholesale trade and repair of motor vehicles and personal accessories and household appliances (5.2 per cent). A drop of 4.2 per cent in the number of employed persons was recorded in processing industry, the most labour-intensive sector in Croatia employing 251,990 workers. Increase in the number of employed persons was only recorded in public administration and defence, compulsory social insurance, up 1.9 per cent to 122,224 employees, electricity, gas and water supplies, an increase of 1.1 per cent, as well as education and other social, welfare and personal services. AVERAGE NET SALARY IN JANUARY HRK3,191 The average per capita net salary in Croatia in January stood at HRK3,191, down 2.2 and 3.2 per cent against the previous month in terms of nominal and real value respectively. According to the State Bureau of Statistics, the average net salary in January this year grew by 4.3 per cent against last year's January. According to ZAP clearing house, the difference between the average salary in January in the State Bureau of Statistics which registered HRK3,191 and ZAP clearing house which registered HRK3,052, was the result of using a different pattern method. However, the difference never exceeded the allowed oscillation of five per cent. While the pattern of the State Bureau of Statistics includes 70 per cent of legal persons and the salaries for the current month, the pattern of ZAP clearing house includes all the legal persons who are obliged to register at ZAP. By national classification, the average salary in January in all the activities fell in terms of real value against December last year but rose compared to January last year. Only agriculture, hunting and forestry posted a 4.4 per cent rise in the average salary against December. Air transport and the production of tobacco products reported the highest salaries amounting to HRK5,217 and HRK4,437 respectively. They were followed by HRK4,435 in financial mediation except insurance and pension funds and public administration and defence and HRK4,178 in obligatory social insurance. Auxiliary activities in financial mediation and leather tanning and processing posted the lowest salaries which stood at HRK1,667 and HRK1,709 respectively. The average salary in tobacco production grew by 15.8 per cent, the highest rise in the average salary in January against December last year, and was followed by an 8.7 per cent increase in recycling. On the other hand, machine and equipment renting and fishing posted the biggest drops in salaries which fell by 37 and 29 per cent respectively. 2. FINANCIAL MARKETS MOST TRADED STOCKS AT THE ZAGREB STOCK EXCHANGE, APR 10 - 14, 2000 No Stock Final price (HRK) % change Turnover (HRK) % change 1. Zagrebacka banka O 1.241 -1,90 8.410.343 173,06 2. Pliva 560 -1,75 2.248.321 272,03 3. Varazdinska banka 220 2,33 2.017.321 -8,99 4. Rijecka banka 125 -3,85 1.057.346 91,08 5. Podravka 152 -1,94 1.033.753 -57,07 6. Zagrebacka banka E 490 -2,00 522.500 -21,69 7. Dalmatinska banka 150 -31,82 320.860 -98,60 8. Splitska banka 90 8,43 92.448 -24,60 9. Koncar 70 -1,41 70.000 -74,49 10. Kraš 141,50 -2,41 55.558 -56,67 TURNOVER 16.132.071 -51,90 CROBEX 863,40 -2,06 MOST TRADED STOCKS AT THE VARAŽDIN OTC MARKET, APR 10 - 14, 2000 No Stock Final price (HRK) % change Turnover (HRK) % change 1. Belisce 60 - 3.595.500 - 2. Ericsson Nikola Tesla 220 0,00 1.195.043 102,40 3. Vis 51 - 1.156.170 - 4. Poljoopskrba 651,36 - 830.484 - 5. PIF Dom 22,50 -6,72 820.632 -4,53 6. Gorica 112,70 - 490.020 - 7. PIF Slavonski 12,50 -7,41 463.784 -44,12 8. PIF Velebit 16,07 -5,47 442.303 -21,70 9. PIF Expandia 23,32 -11,03 441.992 -28,37 10. PIF Sredisnji nacionalni 15,01 -6,19 300.705 2,79 TURNOVER 10.413.351 126,94 VIN 413 1,47 EXCHANGE RATE - HRK Curency Unit 11-April-2000 15-April-2000 % change USD 1 8,072248 8,089176 0,21 DEM 1 3,951040 3,950227 -0,02 ITL 100 0,399095 0,399013 -0,02 GBP 1 12,761420 12,804361 0,34 ATS 1 0,561584 0,561468 -0,02 CHF 1 4,915809 4,911460 -0,09 JPY 100 7,586699 7,641391 0,72 EURO 1 7,727563 7,725972 -0,02 (Source: Croatian National Bank - HNB) SHORT-TERM SECURITY ISSUES Date Issue Maturity Amount subscribed (kn) Interest rate 04-11-00 MinFin T-bills 42 - days 256.200.000 11,00% 04-12-00 HNB T-bills 35 - days 122.200.000 9,77% 04-12-00 HNB T-bills 91 - day 220.000.000 11,00% 04-12-00 HNB T-bills 182 - days 157.300.000 12,30% Total amount of subscribed MinFin T-bills as of April 11th, 2000: HRK 1.063.000.000 Total amount of subscribed HNB T-bills as of April 12th, 2000: HRK 1.754.600.000 3. BANKING, INSURANCE AND FINANCE CENTRAL BANK'S COUNCIL REVOKES INTERIM ADMINISTRATOR OF ISTARSKA BANKA The Council of HNB, Croatia's central bank, last Friday recalled the interim administrator at Istarska Banka, after reviewing the effects of the government's decision, made the day before, to issue substitution bonds for banks that are in the red. At the same time, the Council decided there was no reason to recall the interim administrator of Cibalae Banka bank. According to the press release, the Council reviewed the effects of the government's latest decisions to issue replacement bonds to finance economic restructuring for the banks that last month had interim administrators appointed, based on the then available data about those banks' financial status and the applicable legislation regulating such cases. The Council's decision to appoint an interim administrator at Istarska Banka d.d. Pula had its legislative base in the fact that the inspection carried out by the central bank had found the bank's guarantee capital to be HRK44.4m below the required level. Thanks to an extraordinary income based on the aforementioned replacement bonds, worth HRK57.53m, the guarantee capital is back in the black and stands at HRK6.35m as on March 30 this year, which fulfilled the requirements for recalling the interim administrator and spurred the Council's decision at its meeting this week. At the same meeting, the central bank's Council decided to grant its prior consent to Rijeka Commercial Court, in compliance with the provisions of Article 245 of the Act on Trading Companies, for the appointment of Milenko Vidulin and Antun Suran as respective president and member of the board of Istarska Banka. Since the impact of the replacement bonds on the business indicators of Vinkovci-based Cibalae Banka d.d. bank was found to be insignificant and to have caused no major changes in the bank's performance, the central bank Council decided there was no basis for recalling the interim administrator. VIDULIN ON ISTARSKA BANK Milenko Vidulin, president of the management board of Istarska bank, expressed his satisfaction with the first day of the bank's business after the blockade, because the bank was not, as he put it, "attacked by the savers and other clients". Vidulin said that DEM1.8m were paid to the bank on Monday morning, and the bank paid DEM6.2m to its clients. "A significant outflow of HRK37m was recorded in deposit accounts and giro accounts of legal as well as private persons, which also includes payment orders filed over the past 15 days", stressed Vidulin. According to Vidulin, minor crowds were observed in the bank on Monday, but not more than on days of pension payments, and the bank's cash machines also functioned as usual, with no interruptions recorded. Speaking about the capital increase in Istarska bank, Vidulin pointed out that Istarska bank was currently in contact with about twenty banks, both domestic and foreign, adding that the management board was to propose the appointment of a new supervisory board which was to work on the capital increase together with the management. After the transformation of ownership, said Vidulin, the bank will call a general meeting to elect new supervisory and management boards. Answering the journalists' questions, Lina Slivar-Radovan, retail department manager, stressed that the March pensions would be paid by mail, while the bank would undertake the payment of April pensions. She also said that checks were being cashed in as usual, and the bank was soon to start issuing cheques as well. The visit of HNB commissioners, aimed at monitoring the work of the management over next 90 days and subsequently informing the HNB Council, is scheduled for April 12. DETAILS OF THE SALE OF RIJECKA AND SPLITSKA BANKA AGREED The board of the State Agency for Bank Rehabilitation and Savings Deposits Insurance (DAB) on Wednesday agreed all the details of the agreement on the sale of a majority stake in Rijecka Banka and Splitska Banka banks. Rijecka Banka will be sold to Bayerische Landesbank for US$41.24m, and Splitska Banka to Italy's Unicredito for EURO48.4m. The agreements may be signed in the next seven days. Goran Granic, deputy prime minister and president of DAB's board told the journalists on Wednesday. The difference in the sale of the two banks is that Rijecka Banka is being sold together with the stakes it has in other banks, while such stakes have been taken away from Splitska Banka and will be managed by DAB. Under the deal, the Croatian state keeps a 25 per cent stake in both banks. The money raised through the sale of the two banks is due to reach the state coffers in the course of June. Granic said the process of bank privatisation continued and advisors would soon be selected for the privatisation of Croatia Banka and Dubrovacka Banka banks. Granic thinks the state is losing with the sale of the banks because the taxpayers have paid the price for the banks to be rescued. "It's a painful process which the Croatian state must go through in order to have sound banks. And sound banks are critical for economic development," Granic said. In the final analysis, he finds it positive that with the privatisation of Rijecka Banka and Splitska Banka banks, which comes in the wake of the privatisation of Privredna Banka, Croatia has gets three sound banks with a good equity, in which the Croatian state will keep a 25 per cent stake. This represents a major gain for Croatia. It came at a big price, but was inevitable, Granic concluded. He announced DAB was to prepare comprehensive reports on the bailout and privatisation of the banks. SPLITSKA BANKA BANK MADE HRK38.12M NET PROFIT LAST YEAR Last year, Splitska Banka bank made HRK38.1m worth profit, up 21 per cent against the previous year. The bank's balance reached over HRK7.43bn on the last day of 1999. Last year, the bank's overall revenues and expenses amounted to HRK684.44m and HRK646.32m respectively. Net income from interest stood at HRK202.45m in 1999, up 29.8 per cent against 1998. Last year, the bank issued over 85,000 Visa cards, up 89 per cent compared to the previous year while the overall turnover grew by 45 per cent reaching HRK720m. The bank increased the number of POS terminals to 1,500, which will speed up card transactions. Likewise, the bank installed 30 new teller machines which will start operating in early May this year. General assembly of the shareholders of Splitska Banka bank which employed altogether 1,108 workers in late 1999 was scheduled for May 19 this year. In accordance with the decision reached in early March this year by the management of the State Agency for the Insurance of Saving Deposits and Bank Rehabilitation, Italy's UniCrdito Italiano bank was named exclusive negotiator in the privatisation process of Splitska Banka bank and the management of the agency set the sales terms. The agency expects the Italian bank to accept the sales terms and sign the contract on the privatisation of Splitska Banka bank in near future. The State Agency for the Insurance of Saving Deposits and Bank Rehabilitation is the majority owner of Splitska Banka bank holding 86 per cent of its stock. The privatisation process of Splitska Banka bank includes the sale of the existing shares and refinancing. The agency's intention is to maintain a 25 per cent share plus two shares in Splitska Banka bank. ZAGREBACKA BANKA TO ALLOCATE HRK58.6M FOR DIVIDEND PAYOUT Zagrebacka Banka bank made HRK372.5 and HRK292.6 worth of pre and after tax profit respectively last year. The bank's supervisory board on Monday accepted audited reports for last year and suggested that HRK58.59m should be earmarked for dividend payment to the bank's shareholders. The earmarked amount includes the guaranteed dividend which will be paid to the owners of the second C and the third E series of preferred shares as well as the five per cent dividend for the bank's ordinary shares, nominally worth DEM100. Today, the supervisory board made the proposal on the dividend payment. According to Zagrebacka Banka bank, the Shareholders' Assembly, scheduled for May 24, will reach a final decision on the proposal after the financial results have been presented to shareholders in Croatia and abroad. According to audit report made by KPMG auditor, Zagrebacka Banka group made HRK340.7m worth of profit before tax and HRK266.3 after tax. Last year, the revenues of Zagrebacka Banka bank posted 19.5 per cent rise and reached about HRK1.6bn. This was primarily the result of an increase in the net income from interest which reached almost HRK930m and a rise in income from commissions and fees which reached HRK437m. The bank sold HRK102m worth of Pliva's shares from its portfolio. However, overall revenues of Zagrebacka Banka bank group fell from HRK2.12bn in 1998 to HRK2.09bn this year. The group's financial results reflect not only a reduction in tourist revenues caused by military intervention on Kosovo but also the fact that Allianz insurance company is no longer the bank's subsidiary but an affiliate company. According to the report submitted to the supervisory board by Franjo Lukovic, president of the bank's management, the bank managed to considerably increase its profit and its share in the Croatian banking market in spite of a very difficult business year. "We are ready to accept the challenge of an increasingly fiercer competition in the Croatian banking market and we welcome positive restructuring measures which are currently being taken", said Lukovic. ZAGREBACKA BANK'S GDRs LISTED AT FRANKFURT STOCK EXCHANGE Zagrebacka Banka's global depository receipts (GDRs) were listed in the regulated unofficial market of the Frankfurt stock exchange on April 10, and the trading started on the same day. The listing of Zagrebacka Banka's GDR is due to the increasing interest of E.U. investors in the bank's shares/GDR, announced the bank. In addition to New York and London, the Frankfurt Stock Exchange is one of the largest and most important capital markets in the world, and its market capitalisation reached ?1.2bn last year. The stock exchange consists of three market segments, i.e. the official quotation, the regulated market and the regulated unofficial market. The regulated unofficial market of the Frankfurt stock exchange mostly consists of stocks, i.e. GDRs and other equity securities of foreign companies, with about 3,000 stocks/GDRs. Zagrebacka Banka points out that the listing further strengthens the bank's position and boosts, especially in the euro, liquidity of the bank's stocks/GDRs which have been traded at the Zagreb and London stock exchanges for several years. It is expected that Frankfurt trading will broaden the circle of E.U. investors interested in Zagrebacka Banka, which will strengthen the bank's position on the increasingly competitive global capital market, claims Zagrebacka Banka. MERKUR OSIGURANJE AWARDS THE BULK OF PROFIT TO POLICY HOLDERS Merkur Osiguranje d.d. insurance company last year reported a profit of HRK4.12m. At the recent annual assembly, the company's shareholders decided to transfer the bulk of it - HRK2.75m - to the life policy holders, and the rest is earmarked for mandatory reserves. The insurance company, fully owned by Merkur Versicherung AG based in Graz, Austria, last year concluded 70,956 policies, 13.1 per cent more than a year earlier. Income from premiums totalled HRK118.5m, 41.7 per cent more than in 1998. Merkur's board says it plans to sustain the current growth rate in spite of the unfavourable business environment. Future growth will primarily rely on a broad portfolio of coverage types, among them supplementary health insurance, to be launched this year. IVAN VRLJIC APPOINTED PRESIDENT OF THE BOARD OF LIBERTAS INSURANCE COMPANY The supervisory board of Libertas insurance company this week appointed Ivan Vrljic new president of the management board and asked for the approval of the Directorate for the Supervision of Insurance Companies. Miljenko Javorovic was appointed a member of the board. Vrljic formerly worked in the Finance Ministry as the chief foreign trade inspector and assistant to the minister for the management of financial systems and capital market. According to Gojko Ostojic, a member of the supervisory board, Andela Buconjic, former president of the board of Libertas insurance company, is now working for a foreign brokerage house. Libertas insurer is satisfied with its last year's business performance. The company made eight million premiums last year against three million in 1998. Libertas, the company for the insurance of people, made HRK10.6m revenues and about HRK560,000 profit. In 2000 the company expects further stabilisation of business operations, the growth of the premium and much better business results. Gojko Ostojic, Dubravka Ostojic and Dejan Kosutic have been appointed new members of the supervisory board while former members, Boris Milat, Hrvoje Bozicevic, Drazen Orescanin and Antoino Pehar, have been discharged before the end of their terms. ZAGREB STOCK EXCHANGE TURNOVER REACHES HRK419m A turnover of HRK419.3m, recorded at the Zagreb Stock Exchange in the first three months of the year, represents 76 per cent of the exchange's total turnover last year, and the first quarter turnover increased 59 per cent on the fourth quarter last year. The Crobex index rose 33.1 per cent to 952.3 points. Pliva's shares, which were the most traded shares in the period reaching almost HRK116.9m, accounted for 28 per cent of the total first quarter turnover, with the share price up 17.65 per cent to HRK600. The sale of Zagrebacka Banka's ordinary shares resulted in a turnover of HRK114.5m, 27 per cent of the total turnover, and their final price was at HRK1450, an increase of 59 per cent on the beginning of last year. Varazdinska Banka's shares, whose turnover reached HRK95.2m in the first three months of the year, 23 per cent of the total first quarter turnover recorded at the Zagreb Stock Exchange, were the most liquid shares in the period. The quarter increase of as much as 175 per cent in the bank's shares, which went to HRK220, is due to the fact that both Zagrebacka and Reiffeisenbank are competing for the bank, and is the largest increase in the share price of a total of 33 stocks traded at the Zagreb Stock Exchange in the first quarter of the year. A significant drop, 172.73 per cent, was recorded in the shares of Jadranturist which fell to HRK45, as well as Istraturist which dropped to HRK42.50, a decrease of 123.68 per cent. The most dramatic drop was recorded in the price of the Stedionica Sonic shares falling 76.67 per cent to HRK350, and Jadroplov whose shares went to HRK28, down 65 per cent. VTV RECORDS FIRST QUARTER TURNOVER OF HRK117.3m VTV, the Varazdin OTC market, recorded a turnover of HRK117.3m in the first quarter of this year, and the VIN index rose by 37.04 percent to 407 points. The March turnover reached HRK53.5m, an increase of 165 per cent on the month before, and the daily turnover averaged HRK1.6m in that month. Stock business accounted for the largest part of the first quarter turnover, over HRK98.3m, most of which was made on the sale of shares of Pula-based Istra Cement with HRK34.4m. The final price of the shares was HRK773.70, a rise of 106.19 per cent on the beginning of the observed period. A significant turnover was also recorded in the HRK6.55m sale of Turisthotel Pinija's shares whose price fell 9.15 per cent to HRK74.50 in the first three months of the year. More intensive trading was also noticed in shares of Ericsson Nikola Tesla with a turnover of HRK5.16m. In the period between January and March, the price of Tesla's shares went up 93.91 per cent reaching HRK223. Increase in the trading of the shares of all the seven privatisation investment funds (PIFs) resulted in a turnover of HRK18.88m. In the first three months of the year, the turnover of the VTV PIF quotation exceeded last year turnover of HRK10.5m. Share prices rose in all the seven PIFs, the largest increase having been recorded in the price of the Slavonski privatisation investment fund, up 196.71 per cent (HRK12.61). 4. ACTIVITIES OF GOVERNMENT, MINISTRIES AND STATE INSTITUTIONS GOVERNMENT LAUNCHES MEASURES AIMED AT DEBT SETTLEMENT In its scheduled meeting on Thursday, the Croatian government defined measures aimed at settling the public sector debt, which on December 31 last year stood at approx. HRK9.5bn. HRK3.6bn would be secured from the state budget; HRK1.7bn worth of bonds would be issued to address the problems in healthcare; part of the debt would be settled through a compensation scheme and an issue of fiscal bonds worth HRK1.586bn. The problem of guaranteed savings deposits should also be addressed by settling, from the state budget, HRK420m of the total debt of HRK2.4bn, while HRk1.98bn would be settled through a special scheme about to be designed. The proposal under which the budgetary and extra-budgetary debt is settled was seen by members of the government as its most significant document since the passage of this year's budget. This government decision paves the way for an prompt settlement of the debt that has been dragging on for years; it boosts the depositors' confidence, stabilises the banking system and resolves, to some extent, the liquidity problem, said Mato Crkvenac, the finance minister. He added that HRK1.1bn of the HRK3.6bn debt to be settled from the budget had already been paid out in cash and that another HRK900m would be paid, also in cash, over the next two months. The remaining HRK1.6bn would be covered through an issue of bonds that would mature and become redeemable in the course of this year. At the same meeting, the government endorsed measures for the preparation of this year's tourist season. In order to help tourist companies prepare for the season, the government endorsed a set of measures aimed at helping the heavily indebted tourist industry that has been reporting losses, accumulated primarily through unfavourable loans that came with high interest rates over the past nine years. Because of the exceptional difficulties, a small number of tourist companies will have to go bankrupt, but this is proposed to be put off until after the season since, according to tourism minister, Pave Zupan Ruskovic, this year is likely to bring about a 25 per cent increase in turnover with a foreign currency inflow of US$3.5bn. The measures approved by the government include a rescheduling of the loans tourist companies had previously been granted by commercial banks, the possibility of HBOR postponing the collection of the instalments of the loans granted to finance the preparations for last year's tourist season, and the request that HBOR should make the first disbursement of at least HRK230m to finance this year's preparations. Funds pledged in incentives and subsidies from the state budget should also be supplied, in addition to this year's subsidies and incentives. Likewise, the government ordered the institutional owners of tourist companies to replace their supervisory and management boards which it considers responsible for the companies' unsatisfactory performance. GOVERNMENT HOLDS CLOSED SESSION In the closed part of its meeting on Thursday, the Croatian government endorsed the report on negotiations over the draft social insurance agreement between Croatia and Bosnia- Herzegovina. At the same time, the Croatian Radio and Television company was issued state guarantees backing a Hypo Alpe Adria bank loan , the government's PR office told the journalists. The government backed the decision of HZMO, the pension insurance fund, setting the minimum base if the salary serves as a base for the calculation and payment of contributions and the exercise of pension insurance rights as well as the minimum base for the calculation and payment of the mandatory health insurance contributions. The government made a principled decision that, in case libel charges should be pressed against a government member, the member's immunity would not be abolished. Therefore, in spite of the request by Slavko Linic, its deputy president, the government will advise the Municipal Court in Rijeka that its member retains his immunity. The government will propose to the country's president to confirm the appointment of Marin Brkaric and Mirko Matic as respective deputy prefects of Istarska and Zagrebacka counties. Visnja Samrdzija was appointed assistant minister of European integrations. Antun Golik was discharged of his duties as assistant to the minister of tourism. COMMITTEES APPROVE CENTRAL BANK'S FINANCIAL PLAN In a majority vote on Wednesday, the Economics, Development and Reconstruction Committee of the House of Representatives of the Croatian National Parliament approved the financial plan of HNB, the country's central bank, for the year 2000. Speaking about the plan, Marko Skreb, HNB's governor, said the central bank had envisaged a profit of HRK3m on an income of HRK960m. Although they agree that the central bank's main role is not to make a profit but to maintain the stability of the banking system and the country's overall economy, a few representatives said the bank should still seek to maximise its profit because it contributes to the state budget, which can currently do with every single lipa. Answering to Damir Kajin of IDS, who asked why he hadn't received a copy of the report from the meeting of HNB's Council held at the time when the crisis at Istarska Banka broke out, Skreb said it was up to Parliament to decide whether minutes of HNB's meetings should be sent to the representatives. He pointed out that elsewhere in the world it was customary to make public only those parts of the minutes of the central bank's meetings that refer to the monetary policy, rather than the minutes of the meetings discussing individual banks, because these were considered confidential. The Committee unanimously approved the Bill on Tariffs, which had previously been approved by the Finance and State Budget Committee. Under the Bill, tariffs would be lowered by an average of 28 per cent - a commitment Croatia made during negotiations over its admission to the World Trade Organisation (WTO=. Damir Kustrak, deputy finance minister, said the country was allowed between five and seven years to adjust its economy to foreign competition. He said the lowering of the tariffs was not expected to bring about a sudden increase in imports and the potentially negative impacts on agriculture and food production would be offset by increased subsidies and incentives. The Finance and State Budget Committee also backed the Bill on Amendments to the Act on a Special tax on Oil Derivatives, which would, under the proposal made by the Club of HSS Representatives, legalise the use of heating oil to fuel fishing boats and agricultural machines. Fishermen and farmers are currently paying 4.2 kunas per litre of fuel - three times as much as their peers in other European countries. If HSS's proposal goes through, they would end up paying 1.94 kunas per litre, Ivan Kolar said for the proposer. TISUP ISSUES ANNUAL REPORT The Agriculture Market Information System (TISUP), which operates under the Ministry of Agriculture and Forestry, last year continuously monitored the state of the domestic agriculture and food products market. Its findings are reported in its comprehensive, bimonthly or biweekly reports on the prices of cattle, meat and meat products and many other products, Miroslav Bozic, assistant to the agriculture and forestry minister, said on Wednesday at the presentation of TISUP's annual report. The presentation was part of "Market Information Systems", the international conference held in Zagreb this week, which brought together experts in the field of agricultural marketing from a number of transition and neighbouring countries. These reports have helped many users make business decisions on a daily basis, Bozic said, especially since they contained high-quality data (latest price trends analysis, demand-supply relation, etc.) and figures (a table indicating minimum, maximum and average price of all products in Croatia and a breakdown per county). TISUP was launched a few years ago as part of the project entitled "Developing Family Farm Support Services", and has over the past three years grown into a fully-fledged programme recognised in Croatia and abroad as a reliable and relevant institution. The entire project that TISUP is part of is worth US$30m, to which the World bank contributed US$17m and the rest is financed from the Croatian state budget. TISUP's further growth depends on a few strategic decisions, primarily those related to how it will be financed, its structure and its future role, the meeting said. Namely, its future development must be in keeping with its key mission, which is to continuously increase the transparency of the Croatian agricultural market. Improvements to the current work should run along the lines of developing an analytical approach in market monitoring, speeding up the process of data collection and a redistribution of market information, as well as market forecasts. HFP SURPRISED BY HZMO'S REFUSAL TO PUT STATE-OWNED PORTFOLIO UNDER ONE UMBRELLA The Croatian Privatisation Fund (HFP) was unpleasantly surprised by the refusal, on the part of the management Council of the Croatian Pension Insurance Fund (HZMO), to accept a Draft Agreement on The Management of Shares and Stakes, under which HFP would assume the management of the shares and stakes HZMO currently holds in its portfolio, according to a press release issued by the Privatisation Fund. Under the proposed agreement, HFP would manage the portfolio and make selling decisions in favour of the best bidder, in keeping with the legal provisions, and would transfer on HZMO the money raised through the purchasing price and the dividend. In other words, the Privatisation Fund would not become the owner of the equity, but would rather act as a commissioner managing the portfolio on behalf of HZMO, the press release indicates. HFP is of the opinion that bringing under one umbrella the equity of HMO, DAB and HZMO would be a prerequisite for an efficient management of the state portfolio and a basis for a faster and more transparent privatisation. The project received positive reviews by experts, investors, domestic and foreign consultants, which make the Croatian Privatisation Fund even more surprised by the negative stance of the management Council of HZMO, particularly since the Fund is led by the highest ranking state officials. According to the press release, "We are left to wonder how the information about HZMO's rejection of the proposal will resound among the many foreign partners with whom HFP has held numerous talks over the past two months regarding the privatisation of a single portfolio controlled by the state". Apparently, there is no institution in Croatia, other than HFP, excluding banks, that has the human resources and the infrastructure necessary to carry out such a task. HFP: AGREEMENT ON SALE OF 5.02 PER CENT STAKE IN ZADAR TOBACCO FACTORY GETS SIGNED The agreement on the sale of a stake of 5.02 per cent in TDZ, the Zadar-based tobacco producer, to Igor Meznaric of Zagreb, was signed at HFP, Croatia's privatisation fund, on Tuesday, announced the Fund. Meznaric will pay HRK5m for 957 shares from the HFP portfolio within seven days of the day on which the agreement takes effect. On the occasion of the signing of the agreement, Hrvoje Vojkovic, president of HFP, warned the buyer that the Agency for Market Competition Protection banned TDR, the Rovinj-based tobacco producer, from acquiring the shares of TDZ and that a sale of the purchased shares to TDR would imply the cancellation of the agreement. Meznaric, who pointed out that the shares were bought for his own account, in the tendering process, made a written statement that the shares were not being bought in favour of someone else. HFP therefore concluded that there were no legal impediments for the implementation of the agreement, especially when considering the fact that Meznaric's bid was accepted by the HFP management board as the best bid submitted. Four bids were submitted for the tender to acquire a stake in TDZ at the tendered price of HRK3.73m , two of which did not comply with the requirements set forward in the tender. In addition to Igor Meznaric, the board was also considering a bid submitted by British American Tobacco (BAT) whose price matched the tendered price, lower than Meznaric's bid. 5. COMPANIES SOLVENCY IN MARCH NEARLY UNCHANGED AGAINST FEBRUARY The average assessment of solvency in Croatian companies in March was almost the same as in February and it stood at 412.8244 points. Generally, the assessment is still not satisfactory and it would be even worse if the survey included all business entities in Croatia, announced Zagreb-based Intercredit, a company for the assessment of credit rating and collection of money in Croatia and abroad. According to Intercredit's report for March, most companies went into receivership, were insolvent or unable to collect money. By ownership structure, the situation was the worst in state-owned companies which got 520.0000 points. They were followed by companies with mixed ownership which got 467.5000 points and privately owned companies which got 406.8595 points. By activities, according to Intercredit's report, manufacturing companies were given the highest assessment with 407.2727 points and were followed by partnerships with 416.8421 points and service companies with 413.0357 points. Last month, the majority of Intercredit's clients, 40.3 per cent, were from Austria. 18.5 per cent of the clients were German, 17.8 per cent were Croatian and 17.3 were French. In March, the number of companies which had problems with money collection rose and some clients asked for Intercredit's services even in settling small claims. Most of the claims, 52.70 per cent, were made against trading companies, 32.15 claims were made against manufacturing companies while the remaining claims were made against service companies. SANJIN KIRIGIN HEADS RIJEKA-BASED OIL REFINERY, CAVRAK SISAK-BASED OIL REFINERY According to the announcement made by Croatia's INA oil company this week, Stevo Kolundzic has been appointed advisor to the general manager, Ivan Brusic assistant to the chief executive for oil processing and maintenance and Boris Barkovic director of Rijeka-based Maziva. Sanjin Kirigin has been appointed chief executive of Rijeka-based and Boris Cavrak chief executive of Sisak-based oil refinery. According to the announcement made by Ina's Information Service and Public Relations, Tomislav Dragicevic, INA's general manager, reached the decision, based on INA's Statute, to appoint Kolundzic his advisor. Kolundzic was born in Kutnica (Kutin) in 1941. He graduated in mining at the Faculty of Mining, Geology and Oil in Zagreb in 1966 and has worked in Ina since. Kolundzic is a former director of the Service for Strategic Development in INA's Research and Development. Based on the decision on business management, authorities and responsibilities in INA Zagreb, Zeljko Vrbanovic, chief executive for oil processing, and Ivan Klicek, assistant to the general manager for finance and controlling, decided on several appointments. Ivan Brusic, former director of Rijeka-based oil refinery, has been appointed assistant to the chief executive for oil processing and maintenance. Sanjin Kirigin has been appointed director of Rijeka- based oil refinery while Boris Cavrak, former chief engineer for the environment protection in the Sector for Strategic Research and Development, has been appointed director of Sisak-based oil refinery. Boris Barkovic, former manager of the Regional Development Service of Maziva Rijeka, has been appointed head of Maziva Rijeka. Dominik Horvat, former advisor in the Office of the chief executive for oil processing and trade, has been appointed temporary director of the Finance Sector. HEP TO REQUEST AVERAGE 25 PER CENT INCREASE IN HOUSEHOLD ENERGY PRICES By the end of the week, Hrvatska Elektroprivreda (HEP), Croatia's electricity utility, is to submit a new request for price adjustments to the Ministry of Economy according to which household prices would go up 25 per cent on average as of May 1. HEP will thus request the cancellation of the 12 per cent discount for households as well as the cancellation of discounted consumption, which, if technically feasible, will not apply to worse-off citizens. While households would therefore be subject to an average of 25 per cent increase in the price, the price for industry would either remain the same or slightly go down, announced Ivo Covic, president of HEP's management board at the press conference. HEP's request for the cancellation of the discount for households and the abolition of discounted consumption (up to 80 kWh a month), which was already submitted to the ministry on April 1, but was subsequently formally rejected. The Ministry required that discounted consumption should be preserved for citizens whose purchasing power is at a lower level, and expressed its opinion that the price set for industry was also beyond its financial power. Although HEP thinks that it is not good to classify consumers according to social categories, Covic said that analysis were being made to find a model which would retain the discounted consumption for worse-off citizens. The existing discount of 8 per cent for industry, as well as the discount for public lighting would be retained, and there could also be a slight decrease in the price. The average price of electric energy would thus go up by 10 to 11 per cent on average. The increase in prices for households, which would depend on the scope and method electric energy use, would average 25 per cent, explained Covic. The price increase is due to the "huge and dramatic" increase in the price of fuel, i.e. a rise of 150 per cent in prices of heating oil and 88 per cent in gas when compared to last year. HEP's figures show that if the price of fuel had matched the December price throughout last year, HEP would have made a loss of HRK600m plus HRK400m due to the change in the dollar rate."The management of HEP considers that the existing price does not provide for the normal functioning of the company", said Covic adding that the former management had also asked for price adjustments four times last year, but their request had been rejected. The new prices would increase HEP's total income by HRK500m per year, and if taking effect on May 1, the increase would reach HRK300m. HEP warns that its receivables have amounted to HRK1.7bn, of which 1.36bn in corporate debt, and HRK361m in debt from households. HEP's liabilities to suppliers go slightly over HRK1bn. Asked about the agreement with U.S.-based Enron on the construction of the Jertovec gas-fired power station, Covic said that the agreement which had been signed was a delicate matter and its cancellation would not only affect HEP, but the state as well. The agreement comprises a period of 20 years and is unsatisfactory in terms of the price of electricity supplied from Jertovec as well as its potential impact on the restructuring model of electricity sector, explained Covic. HEP also announced that the company was working on a new, more transparent, charging system and the company also revealed its intentions to start the fight against energy theft. In losses made in distribution, totalling 12 per cent, technical losses, due to obsolete equipment, account for 7.5 per cent, and of about 4.5 per cent of other losses, theft-related losses represent 1 per cent thus making HEP lose an estimated DEM25m. PROJECTION OF SALES OF KONCAR PRODUCTS AND SERVICES TO REACH HRK1.46bn Members of Koncar Group are planning to earn HRK1.46bn on the sales of the group's products and services, as much as last year. An increase of 10 per cent is expected in domestic sales which could thus go to HRK717.8m. Just as in previous years, the company's largest domestic buyer would be HEP, Croatia's electric utility, which would account for 45 per cent of Koncar's sales of products and services. Trade would represent 24 per cent of the company's projected sales, and industry and shipbuilding as well as companies of public interest would account for 8 per cent. The proportion of Koncar's foreign sales in total sales is expected to reach 43.2 per cent (nearly HRK560m), and 79 per cent of the company's exports will go to 17 countries, mostly in Europe, as well as to Saudi Arabia, U.S.A., and the United Arab Emirates. According to the projections, Koncar's major export market in this year will be the market of Bosnia-Herzegovina with the expected HRK73.4m, followed by Slovenia, HRK42.6m and Germany, HRK40m. Sales of products and services of Koncar's group amount to HRK181.3m, a drop of 6 per cent on last year. Koncar announced that no changes in either the number or the structure of employees were planned for this year. The company intends to increase its work productivity, measured as sales per employee, from HRK315,000 to HRK319,000, an increase of 1.3 per cent on last year. BUSINESS RATIONALISATION BRINGS PROFIT TO ELEKTRODA In spite of Croatia's troubled shipbuilding, Zagreb-based Elektroda, Croatia's only producer of electrodes, made a profit of HRK725,960 last year. The profit is due to the rationalisation of the company's business and reduction in all costs. Elektroda's total income was at HRK33m, a decrease on 1998. According to the management, the company has no room to increase its income at the moment, and will therefore continue cost reductions in order to keep up with foreign competition on the domestic market. The company's performance is expected to match last year figures. Elektroda's supervisory board proposes that a dividend of HRK689,660 of last year's profit should be distributed to the shareholders at the next annual meeting, and the rest will be allocated for the company's statutory reserves. The company's DEM9.34m share capital is in the hands of small shareholders who have majority ownership of the company. Elektroda employs 130 workers. OLT APPOINTS NEW PRESIDENT OF THE BOARD The supervisory board of OLT, the Osijek-based metal processing company, on Monday re-appointed Branimir Kovacic as the new president of the board, thus putting an end to the few months' crisis concerning the appointment of the company's leader. Ivo Brzica, the previous president, resigned in the wake of the public statements made by some members of parliament from the ranks of the ruling coalition, who claimed the announced shrinkage in the company's DEM20m equity might be linked with some illegal dealings. The supervisory board had, on a few occasions attempted and failed to appoint a new chief executive. representatives of HFP, the Croatian Privatisation Fund and of Slavonska Banka bank - OLT's majority owners, endorsed Kovacic after having talked with him, and the new president asked to be given five days to assess the company's situation before announcing his programme. A spokesman for the company said an Italian company that had previously done business with OLT had expressed an interest in renewing OLT's casting business - an investment of between DEM30,000-40,000. He refused to disclose the name of the potential buyer that has so far offered to purchase the products, and may later seek to either lease or purchase OLT's casting plant. BANKRUPT SAVRIC TO SELL ITS JANKOMIR PRODUCTION PLANTS Savric d.d., currently in bankruptcy, will soon put up for sale its Jankomir plants, after selling Pilana Durmanec sawmill, Krapina chair factory and Bregana kitchen factory, Marinko Paic, the official receiver, said. At the second hearing, to be held early next week, the Zagreb Commercial Court will review the creditors' claims filed after the deadline for submitting claims had expired. According to Paic, the line of creditors to be paid first covers a debt of HRK10.1m owed to the state and the city of Zagreb. The company owes HRK62.69m in back wages and severance benefits, while the third line of creditors involves HRK18.78. Savric d.d. is currently operating with 230 workers. 116 have had their job contracts extended until the end of this year's June. earlier this month, Magor d.o.o. bought Krapina chair factory for DEM1.1m and employed 100 of the previous 134 workers. Ten per cent of that amount will be used towards covering the cost of the bankruptcy proceedings, and the rest went to Zagrebacka Banka d.d., which had a mortgage over those assets and Pilana Durmanec sawmill. Bregana kitchen factory has been sold to Valdigara d.o.o. for DEM1m. The new owner kept 50 of the total of 53 employees. The mortgage over that asset was held by Hrvatsko Ugostiteljsko Poduzeće catering company and Samoborska Banka bank. Pilana Durmanec sawmill has also been sold and Yeti-gel, the new owner, who paid for it DEM700,000, took over 50 of the previous 90 employees. In addition premises in Bitola, Macedonia, have been sold, as well as those in Velika Gorica and Jukiceva. According to Paic, 575 workers have received regular wages since the bankruptcy proceedings were launched, and 75 have been put on welfare. The money owed in severance benefits will be available only if Savric's remaining assets are sold and only after settling the claims in the first line of creditors. BELJE SUPERVISORY BOARD: FUTURE WITH GOVERNMENT SUPPORT The supervisory board of Belje d.d. and the company management as well as the Government, Croatian Privatisation Fund and Ministry of Agriculture are redoubling efforts to help the Baranja company to get back on its feet and continue business. Bankruptcy is out of the question, and the management is to provide a new rehabilitation and restructuring scheme by April 28, said Zeljko Svedl, president of Belje's supervisory board, after a session held on Tuesday which was also attended by the management. Marijan Molnar, representative of Belje's small shareholders who had rejected the appointment to the supervisory board at the emergency meeting held in Belje on April 7, was also present at the session. Molnar announced on Tuesday that he intended to remain in the supervisory board because "the proposed solutions give hope that the joint effort will produce results." Supervisory board president Svedl invited the leaders of the Belje trade union to take part in the issue together with the management and the supervisory board. Slavko Kotromanovic, regional commissioner of the PPDIV trade union for Slavonia and Baranja, was also invited to attend the session, but Kotromanovic rejected the invitation and did not attend the session. Talking about the future of Belje, Svedl pointed out that the Government of the Republic of Croatia had provided guarantees worth HRK21.4m, which had been used for the purchase of raw materials, fertilisers and pregnant heifers. The Government is also prepared to provide guarantees of up to HRK81m after the submission of the scheme to be drafted by the Belje management. Svedl called on the workers to stop the protests and go to work to successfully complete the spring sowing works. Josip Hrala, member of the Belje supervisory board and assistant to the minister of agriculture and forestry, pointed out that the future of Belje was not in question. He invited all Belje's business associates and banks to stand by the company which was also supported by the Government. Bozo Cerkez, president of the Belje management board, stressed that the rehabilitation and restructuring scheme should now be reconsidered and that the meeting had resolved many unclear issues. The payment of the November salary started yesterday, and the payment of the salaries will follow the payment of the funds approved by the Government, said Cerkez. WORKERS OF PIK VRBOVEC LIFT ROAD BLOCKADE The workers of PIK Vrbovec on Monday lifted the roadblock in Vrbovec area and gave up the announced blockade of Zagreb-Budapest railroad track. Trade union representatives said that workers had received a written confirmation from PIK's management that advance salaries for January and February as well as all the travelling expenses had been paid on PIK's giro account, which was the workers' main request. LUKSIC GROUP WINS 80 PER CENT VOTES AT PLAVA LAGUNA GENERAL MEETING The representatives of Luksic Group announced at the press conference held in Porec on Tuesday that the group had acquired 65 per cent of the shares of Plava Laguna, a tourist company, upon the expiry of the date specified in the invitation for tenders. Luksic Group has an option agreement for the purchase of a stake of 16.3 per cent stake from the portfolio of Privredna Banka Zagreb (PBZ), which would enable it to have 80 per cent of the votes at Plava Laguna's general meeting. Jaime Guerrero Devlahovich, president of Plava Laguna's supervisory board and representative of Luksic Group, pointed out that Andronik Luksic's Excelsea Anstalt, member of Luksic Group, purchased Plava Laguna's shares at the price of HRK1,000. Luksic Group will pay HRK260m to the small shareholders and the total amount of money to be paid for the majority stake reaches HRK400m. Guerrero rejected speculations about Luksic Group's involvement in money laundering. Pointing out that the allegations against the group were groundless, Guerrero said that Luksic Group "was supervised by the U.S. securities commission and similar institutions in Great Britain, Chile and other countries", and these financial institutions could by no means be involved in money laundering, said Guerrero. The president of Plava Laguna's supervisory board said that Plava Laguna was to improve the quality and standards of its service, and the workers should not worry about their future because the group intended to preserve the present workplaces and create new jobs in the company. Guerrero also said that the group was currently working on a strategic ten-year plan for Plava Laguna, following some market research and consultations with Plava Laguna's management, which, as Guerrero promised, were to stay at leading positions of the company to create its business policy. Answering a journalist's question, Guerrero promised that the group would cooperate with the Plava Laguna investigation commission established by the Croatian Parliament and pointed out that all the necessary information on the group's, as he put it, "legal and regular acquisition of Plava Laguna" was to be submitted. AMFORA FOUND TO OWE ZAGREBACKA BANKA AN UNDISPUTED DEM20m Zagrebacka Banka d.d., which as a major creditor of Amfora, the Makarska-based producer of soft drinks, petitioned for its bankruptcy before the Split Commercial Court, is claiming DEM115m. Zeljko Dragovic, Amfora's official receiver, says this represents nearly 99 per cent of the overall claims. How much of this amount is accounted for by the company itself and how much is represented by the other fifteen companies owned by Josip Gucic, which have also been sent into receivership, remains to be seen. The undisputed debt to Zagrebacka Banka currently stands at DEM20m, i.e. the value of the loan Amfora used to streamline production and purchase a 65 per cent stake in Badel Bap, Dragovic said. The bankruptcy assets have not yet been assessed. The first hearing is due to be held early next week to review the received claims. The company performed successfully until 1999, with a record income of reported in 1998. However, unfavourable trends in the exchange rate and interest the company posted a HRK28m loss, the bulk of which is accounted for by interest on the Zagrebacka Banka loan under which Amfora is a co- debtor. Given Amfora's highly demanded products and streamlined production, and since it covers a market stretching from Zadar to Dubrovnik, including a part of Bosnia-Herzegovina, the company believes it will emerge from the bankruptcy proceedings having a new owner. The company, which employs 160 people, has been operating for as long as 40 years. Over the past few years, it has made a major investment in two bottling plants, purchased 80 new cargo vehicles, invested in infrastructure and renovation of the buildings. It has invested up to DEM4.5m per year in marketing. DALMA MALOPRODAJA'S BANKRUPTCY ESTATE SUFFICIENT TO COVER DEBTS Overall claims filed until now by creditors of Dalma-maloprodaja retail chain amount to about DEM3m, and are likely to climb to DEM4m as the bankruptcy proceedings continue. The claims are likely to be settled, given that the bankruptcy estate includes 5,500 square meters of premises located in the town of Split area, which analysts estimate to be worth DEM11m. The Split Commercial Court has decided to suspend the sale of Dalma-maloprodaja's assets until the case filed with the Zagreb Commercial Court is concluded. Namely, small shareholders of Dalma d.d. had earlier pressed charges requesting that the incorporation of Dalma be declared void. Since the Commercial Court had ruled against them, they decided to appeal the decision before a higher court. Out of the company's former workforce of 170, 50 are currently working in the company's leased out premises. Jasenka Babic, the official receiver, said another 25 workers have recently been re-hired to work in three subsequently leased out premises. Negotiations are currently under way over the lease of another 1,000 square meters of premises that need to be refurbished. If the deal goes through, another 20 workers could find jobs. The future of the retail chain, currently owned by Zagreb-based Diona, is hard to predict, but the official receiver believes that the fierce competition in the retail industry makes restructuring an unlikely option. It is now a priority to ensure jobs for as many as possible of the company's former employees, who are owed between HRK4-5m. 12 of Dalma-maloprodaja's premises have been leased out so far, and the lessees have been paying the lease fee regularly. THREE LARGE WHOLESALE MARKETS TO OPEN IN THE COURSE OF THE YEAR The over DEM65m project to build a network of fruit, vegetable and flower wholesale markets, is in full swing, with three of the envisaged six markets, respectively in Osijek, Rijeka (Matulji) and Benkovac, scheduled to open in the course of this year. The wholesale markets in Split and Metkovic are expected to open in the second part of the year, while the building of the largest market, the one located in Zagreb, has been suspended due to an unresolved land property issue, Zoran Krsnik, director of Nacionalna Veletrznica d.d., the national wholesaling company, told the participants of the round table entitled "State of the Fruit and Vegetable Market with Relation to the Wholesale Market", which was held as part of the international conference entitled "Market Information Systems". The building of the wholesale markets will boost the efficiency of the wholesale trade in agricultural products and cut the margins by encouraging market competition, which will directly benefit fruit, vegetable and flower growers by creating a level playing field in the form of wholesale markets, Krsnik said. In addition, the project is designed to promote the internationally accepted standards related to product quality, hygiene, packaging, storage and distribution of fresh fruit, vegetables and flowers in order to sharpen the edge of the local producers. The six-wholesale-market project is jointly funded by the public sector, with the state, counties, and municipalities contributing a total of DEM21.6m, part of it in the value of the land for the site and the other part - DEM6m - in cash, and the private sector, which is expected to contribute DEM9m. 6. INTERNATIONAL COOPERATION IMF AND CROATIA NEGOTIATE ECONOMIC ASSISTANCE PROGRAMME Croatia and the International Monetary Fund (IMF) have been negotiating Croatia's economic programme for 2000/2001 which the IMF may back with a stand-by plan funds, the IMF's mission in Croatia said in Zagreb on Wednesday. IMF's delegation headed by Hans Flickenschield visited Zagreb from March 29 through April 12 and discussed with government officials, representatives of the Croatian National Bank (HNB), trade unions, employers and financial institutions the economic situation in the country and prospects for the future. IMF's delegation is expected to come for a second visit to Croatia in June in order to resume the negotiations. In the meantime, the Croatian government will consider a few economic policy options within the proposed plan. In connection with this, the Croatian government has asked the IMF, the World Bank and some other institutions to provide technical assistance and advise it on some of the options. Between April and June 2000, the IMF will send to Croatia three technical assistance missions for fiscal policy, managing the state treasury and liaison between the central bank and the Finance Ministry. NEVEN MIMICA IN TALKS WITH EBRD DELEGATION Neven Mimica, deputy economics minister, last Friday talked with a delegation of EBRD, the European Bank for Reconstruction and Development, which is on a fact-finding mission in Zagreb, gathering macroeconomic and other relevant data needed for designing a strategy for future co-operation between Croatia and EBRD, the Economics Ministry said. EBRD representatives said the final version of the document was due later this year. The loans EBRD has granted to Croatia so far and technical assistance it has provided have placed it, alongside the World Bank, among the country's major sources. A total of 36 projects have been approved so far, 29 and seven in the private and public sector respectively. Seven new projects, worth a total of EURO245.7m, are in the pipeline. These involve private sector investment, the strengthening of small and medium-sized businesses and priority infrastructure investment in the field of energy, telecommunications, municipal infrastructure with an emphasis on environmental protection, agriculture and traffic, says the Ministry. Mimica informed the EBRD delegation about the situation in the Croatian economy, and briefed them on the privatisation of the remaining state-controlled companies. The delegates also heard about the draft Law on Encouraging Investment and the plans to privatise INA oil company and HEP, the electrical utility. FIZULIC SAYS TURKEY IS INTERESTED IN INVESTING IN CROATIA'S TOURISM Turkish investors are interested in using the US$100m loan granted by Turkey's Exim bank to develop and invest in the Croatian tourist industry, Goranko Fizulic, economics minister, said on Wednesday in the wake of his three-day visit to Turkey. Turkish investors are primarily interested in high class hotels and the building of golf courses, an area in which they have a vast experience given that they took only three years to put the country on the list of the world's golf destinations, Fizulic said. Speaking about the specific results of his visit, Fizulic said that the Croatian builders may take part in the construction of a large water supply system that will connect Turkey's Mediterranean coast with Jordan and Israel. In addition, Koncar can expect to resume co-operation related to the export and adjustment of electrical train engines to meet the needs of the Turkish railways. Fizulic also negotiated new contracts for the Croatian shipbuilders through co-operation with Turkish shipyards. During his visit to Turkey, the Croatian economics minister talked with four state and two non-state ministers, representatives of a developers' association and the maritime chamber, and gave two presentations intended for Turkish business people and analysts. EUROSTAT MISSION TO HOLD FIRST MEETING WITH STATE BUREAU OF STATISTICS The mission of Eurostat, the Bureau of Statistics of the European Union, visited the State Bureau of Statistics for two days this week. The two institutions intend to resume good co-operation which was stopped in 1995. According to Ivan Rusan, the director of the State Bureau of Statistics, the precondition for resuming co- operation is a detailed review of statistical researches in the State Bureau of Statistics. Namely, in keeping with the political decision of the EU, international co-operation and Croatia's participation in Phare was suspended in 1995. "In spite of that, the State Bureau of Statistics was developing and upgrading on the national level the statistical system compatible with the systems of the UN and EU", said Rusan. In order to achieve this goal, the State Bureau introduced international statistics standards, classification, nomenclature and methodology. The aim of Eurostat mission's visit to the Croatian State Bureau of Statistics was to determine the present level of comparability between the statistical data and the needs, the pace and the priorities in approaching the European statistical norms and standards. The result of the mission will be the preparation of the statistical chapter in the Feasibility Study for opening the negotiations on signing the Stabilisation and Accession Agreement. During its visit to Croatia, Eurostat presented to the State Bureau of Statistics the main activities and programmes for co-operation with candidate countries from the West Balkans. The two sides discussed the best way for the State Bureau of Statistics to join these programmes and activities. Likewise, Eurostat presented the draft version of a document entitled Reform of Official Statistics in South-eastern Countries, the Main Plan, Strategic Orientation for the years 2000-2006. The State Bureau of Statistics will finalise and determine its priorities in the document which will serve as basis for the future co-operation between the countries of the West Balkans and the EU. According to Rusan, the meetings between the Eurostat and the State Bureau of Statistics will continue. In order to create a better understanding and a broader picture of the functioning of the Croatian statistical system, the State Bureau will also organise meetings between Eurostat and other institutions in charge of conducting statistical research in Croatia like the Finance Ministry, the Croatian National Bank, Customs Administration, etc., in keeping with the Law on Statistics. CROATIAN AND UKRAINIAN EMPLOYERS SIGN CO-OPERATION AGREEMENT Zeljko Ivancevic, director general of the Croatian Employers Association, and Anatolij Kinah, chairman of the Ukrainian Manufacturers and Entrepreneurs Federation, on April 10 signed in Ukraine's capital, Kiev, a co-operation agreement, a spokesman for the Croatian Foreign Ministry said on Thursday. The agreement represents a framework for supporting the implementation of intergovernmental agreements between Croatia and Ukraine and further co-operation between the two associations, says the Ministry in its the press release. The Ukrainian Manufacturers and Entrepreneurs Federation is a non-profit, non-governmental organisation that brings together 20,000 collective members from all economic sectors and accounts for 80 per cent of the country's gross domestic product. Ivancevic invited Kinah to visit Zagreb with a delegation of Ukrainian business people. The two sides also agreed that both associations would back the preparations for the Economic Forum to be held in Kiev later in June with the participation of Croatian companies and entrepreneurs. 7. FAIRS AND EXHIBITIONS SPRING AND CONSTRUCTION TRADE FAIRS OPEN IN RIJEKA The Spring Trade Exhibition, an international exhibition of equipment and consumer goods, and the Construction Trade Fair, organised by Rijecki Sajam under the auspices of the Primorsko Goranska County and the Rijeka City Government, opened in Rijeka on Tuesday. The ninth spring fair presents hotel and catering equipment, as well as equipment for tourism and citizens. The construction fair, which also includes the exhibition of innovations, will present equipment for construction companies for professional and general use. The spring exhibition and the construction fair, attended by 130 exhibitors, will be open until April 16.