Slovakia and Croatia repeatedly declare (the last time they did so was at the Central European Union Zagreb summit) their interest in economic co-operation. However, the experts assess the mutual exchange of foreign trade in the past years as stagnating. We asked Rastislav Krba, PhD., Commercial Councillor of the Slovak Embassy to Croatia, for more detailed information.

The relations between Slovakia and Croatia have been friendly for a long period of time. There were positive conditions for economic co-operation. The interest in developing them is reflected in 11 economic agreements, signed by both countries, which represent the basis of bilateral co-operation. How does the mutual trade really look like?

The Slovak exports in the past five years have an increasing tendency. In 1993, we exported goods in a value of USD48 million to Croatia (F.O.B. - Slovak statistics), in the next years of USD60.6million, 72.3million, 73.4million and 78.1million. The exports from Croatia were substantially lower: from USD13.7 million in 1993 to USD20.2 million in 1997. The total turnover developed from USD61.7 million, trough 78 million, 92.6 million, 96 million to USD 98.3 million. The share of Slovak positive balance fluctuated from 2.8 to 2.9.

On one hand we speak about satisfactory agreements, on the other hand we have to admit that business is decreasing. What do think is the reason for this paradox?

Croatia accepted a number of internal measures, which make the export conditions more difficult. The maximum customs tariff, for instance, reached as many as 25 per cent. Additional border protection was introduced as well. With some commodities it reaches the amount of the duty. Another factor is the introduction of obligatory certification, one for food products, a different one for other commodities.

What are the results of your analysis of the current situation?

Commodities that we successfully exported in 1995 and 1996 started to intensively decrease. The narrowing of the assortment of exported commodities was accompanied by restructuring of the exports - textile products, glass and to a certain extent also furniture started to be exported. The decrease of the exports was partially caused by limited export of timber, living cattle and meat, which were the focus of our exports in the past years. In general, we can say that the assortment narrowed, however the decrease in absolute terms is not big.

What is the Slovak situation like in comparison to the Czech Republic?

The Czech Republic, which imports construction iron also registered certain decrease, but unlike in Slovakia, it was not a decrease of assortment but that of absolute values, which is even higher than ours. I do not mention it in order to excuse the Slovak decrease, but we have to realise that as far as the volume of the deliveries is concerned, most of the business takes place on the level of small and medium entrepreneurs that means that it is very sensible to assortment and payments.

Croatian economy is characteristic by deficit of free active capital. Did the Croatian payment situation cause the commercial decrease?

Our exporters often ask to be paid in advance, which is a problem because of the shortage of free active assets. The Croatians often require not a 90-day but a 120-day payments. The insolvency in Croatia keeps increasing since 1991. Since 1997, the amount of unpaid orders increased by HRK 2.5bn (HRK/DEM = 3.52, HRK/USD = 6.96 as of December 31, 1997). Until August 1998, they decreased by HRK 11.7bn (HRK/DEM = 3.602, HRK/USD = 6.444). These values are of no relevance, since they express only registered outstanding debts. The real value is supposed to be much higher. Moreover, the value does not include claims from state-owned companies enforced by legal means, which represented HRK 3.1bn as of June 1998, while their own debts to the companies represented HRK 2.5bn. In August 1998, the number of insolvent companies was 25, 947 with 152, 736 employees. The interesting fact is that from among 300 companies with highest 1998 arrears (HRK 4.3bn), 70 had no employees. These companies represented 20 per cent of the arrears. As far as the maturity is concerned, HRK 8973 million (76.5 per cent) is older than one year, while only HRK 387 million (3.3 per cent) is due within 60 days. This structure points at the fact that insolvency is a long-lasting problem. Private companies have the highest share on long-term outstanding debts (62.6 per cent, which is HRK 7.347 billion). Mixed ownership companies represent only 20.1 per cent of the outstanding debts, while the debts of the state-owned companies are only 7.5 per cent. The debts of the state-owned companies decreased in comparison to 1995. The greatest extent of the outstanding debts was registered with wholesale and retail sale organisations - HRK 4.927 billion, 42 per cent.

How would you assess activities of the Slovak companies on Croatian market?

I retain that the activity of Slovak companies as independent subjects is decreasing, while the number of joint companies is on increase. Moreover, trading companies, production companies working in the refining process appear. I can mention the example of the last autumn fair, which, according to the catalogue, hosted 12 Slovak exhibitors. However, they were not presented as independent Slovak companies, but as organisations with Croatian names, making business with Slovak products.

Does that mean that the easiest way of penetrating into the entrepreneurial sector are joint companies?

Right. The best way of conducting business in Croatia is to do so in the form of a joint company.

Anyway, is the Croatian privatisation and industry restructuring not little transparent to be advantageous for the interests of the foreign companies?

The economic transformation can without any doubts be accused of a certain non-transparency, however, it does not prevent big companies, which, besides offering their products are looking for a way to join companies with equal production programme, from penetrating into the Croatian economy. Their activity focuses on the refinement process, intermediate products and components to be finalised, which is an efficient weapon against the barriers of the customs regime.

Which Slovak company is in your opinion the most successful on the Croatian market?

I like the steps taken by North Slovakian Pulp and Paper Works from Ružomberok, which established a branch in Croatia, through which they are successful in selling paper. Another example is SAM Myjava, whose branch has also successfully established itself in this environment.

The Croatians used to export construction capacities, however the situation turned around in the past years. Did Slovak civil engineers use the possibilities offered by Croatia?

I am very glad that the possibilities of co-operation are positively developing just in the field of civil engineering. A collective agreement on putting a pilot project - construction of flats in Zagreb, into force is to be signed soon. The profit will be used for the development of further constructing activities of Slovak companies in Croatia. From the Slovak party, the General Credit Bank (VUB) is going to participate in the project, the Zagreb Bank is going to be the Croatian investor. After the Zagreb Bank approves the project, its the putting into force will initiate within several weeks.

Do you think the Croatians are to be open to manpower import, regarding the fact that the unemployment rate in Croatia is 17.5 per cent?

Concerning the high unemployment rate in Croatia, the import of labour force is forbidden and therefore, any attempt to import even a couple of workers together with capital will not be successful. This is a lifelike illustration of this entrepreneurial space. It will be inevitable to look for a solution to the aforementioned problems, obviously only within the given limits.

At the beginning we mentioned that both countries signed 11 economic agreements, other 4 are in the preparation stage. How do you assess legislative conditions for bilateral co-operation?

As far as the legislation is concerned, the basic entrepreneurial space has already been created. There are optimal conditions for mutual trade, as well as for establishing and operation of joint companies. The decisive fact at the moment is as to whether we manage to use these conditions.

Slovak Trade FORUM