|
EBRD role in Croatia enhanced by new era of reform
The European Bank for Reconstruction and Development (EBRD) today announced a new strategy for Croatia that will support the country’s efforts to reduce the role of the state in the economy, attract private capital and promote sustained growth.
Alain Pilloux, EBRD Business Group Director for Central Europe, said: "The new government has adopted a platform of further economic reforms and the integration of Croatia with the rest of Europe. This reform agenda will provide renewed impetus for the Bank’s activities in Croatia."
The EBRD has played a significant role in promoting Croatia’s transition to a market economy. It was an early investor, supporting the country’s post-war reconstruction, and has boosted the country’s progress towards a market economy by promoting foreign direct investment (FDI), privatisation, the restructuring of the financial sector and the development of infrastructure. As of 30 September 2000, the Bank had made commitments to 33 projects in Croatia involving direct Bank investment of € 571 million and a further € 1.7 billion from sponsors and co-financiers.
To boost Croatia’s renewed drive for economic reform and international integration, the EBRD’s new strategy focuses on the following priorities:
- support for the privatisation process and foreign direct investment in all sectors, especially greenfield FDI associated with developing new production processes and technology, improving management skills, and raising the level of job skills and knowledge;
- encourage the commercialisation and corporatisation of infrastructure, including promoting private sector participation;
- assist the development of non-bank institutions, banking sector consolidation and the introduction of a broader range of financing structures and products;
- continue efforts to increase financing sources for small and medium-sized enterprises (SMEs), including strengthening existing schemes, encouraging funding from donors and international financial institutions, and promoting co-financing, with particular emphasis on SME support in war-affected areas;
- promote cross-border projects in all sectors that further regional integration;
- expansion of the equity portfolio either directly or indirectly through regional equity funds.
The volume of investments by the EBRD will depend on the level of improvements in the investment climate and the implementation of the reform agenda.
In its macroeconomic assessment of Croatia’s progress in transition, the strategy paper says there are strong signs of economic recovery in 2000. Forty-four per cent more tourists travelled to Croatia in the first half of 2000 compared with the previous year, when war broke out in Kosovo. Industrial production is up by 3 per cent during the first six months of the year, spurred by export demand. By year-end, growth could be around 3.5 per cent, with the current-account gap at 4.1 per cent of GDP, compared with 7.6 per cent at the end of last year. Risks remain, however, if the government is unable to address the remaining fiscal problems, such as increased tax arrears, high government expenditure in the country’s sizeable public sector, and continued soft budget constraints on enterprises.
On a microeconomic level, the paper says Croatia’s progress towards a market economy has been modest and warns that it continues to lag behind other advanced transition economies. There have been marked efforts recently to strengthen the banking sector, which has been frequently prone to crises, and to accelerate privatisation – in telecommunications for example. The private sector accounts for roughly 60 per cent of GDP, which leaves considerable room for growth. The challenge is to increase reform efforts, especially in the areas of privatisation, enterprise restructuring and commercialisation of infrastructure. Improvements in the judiciary and government administration would create an environment more conducive to new enterprises.
Before the end of the year, the EBRD expects to sign several new projects in Croatia. The Bank’s Board of Directors has approved a € 150 million syndicated loan to Agrokor, Croatia’s largest food company. The EBRD expects to provide € 60 million, with a further € 90 million syndicated to commercial banks. With a long-term focus, the loan is expected to support the company’s domestic growth and to facilitate its access to international capital markets, which will raise the profile of Croatia’s corporate sector.
The EBRD is also seeking to develop further its relationship with Pliva, Croatia’s pharmaceutical company, by supporting the construction of a new state-of-the-art research institute in Zagreb. The Bank will contribute up to € 40.6 million of the project costs, which will significantly enhance Pliva’s ability to develop new products and to expand its pharmaceuticals portfolio.
Strategy for Croatia
|
