- Telecommunications equipment (TEL)
- Renewable Energy (ELP, OGM, OGS, TRN)
- Transportation Infrastructure and Related Equipment (TRN)
- Environmental Equipment (ENV)
- Tourism Infrastructure (TRA)
- Franchising (FRA)
- Recreational Boating and Equipment (PLB)
- Wellness & Spa Equipment (HCS, SPT, HTL, WRE)
- Agricultural Sector
Telecommunications equipment (TEL)
Overview
Until a few years ago, the Croatian telecommunications market showed an inclination towards fragmentation, with dozens of alternative ISP and telecom operators appearing after full liberalization of telecom services in the beginning of the decade; eventually, the small size of the market drove most of those companies out of business. Some companies that showed resilience and/or creativity were eventually taken over or merged; Iskon Internet, the only company that seemed to have the potential to compete with the incumbent telecom operator on a larger scale, eventually received an offer it could not refuse and is now a member of the Croatian Telekom group, which is in turn owned by Deutsche Telekom.
However, the telecom companies – the likes of Metronet and Optima Telekom - that were properly capitalized have not only survived, but are currently playing a significant role in the financial markets as well, attracting significant investments through their debt and equity flotations. Five years ago, this scenario would have seemed impossible.
The only market segment that remains undisturbed is the mobile telecommunications – Croatia is now well past the point of a 100% mobile telephony penetration, and with three existing mobile operators, there is little room for new market entrants.
All of the Croatian telecommunication market segments are financially strong and well-capitalized; this keeps the telecommunications equipment purchases at high levels.
Best Products/Services
Mobile communications remain the most developed market segment with penetration rate estimated at as high as 90 percent, while the broadband penetration sits at the bottom of the list with a penetration rate of just over 2 percent. The incumbent operator, T-Hrvatski Telekom, is focused on marketing ADSL and has launched a MaxTV service – digital TV combined with video-on-demand service for its subscribers.
Mobile operators are keen on expanding their services to provide for mobile broadband; in the last two years alone, VipNet – one of the two major mobile operators that split the market roughly in half – invested USD 100m in this segment of its network.
Opportunities
With the infrastructure being well developed, it is expected that the overall imports of carrier-grade equipment will slow down and the demand will shift to end-user telecommunication devices.
Resources
Croatian Telecommunications Agency – http://www.telekom.hr
Renewable Energy (ELP, OGM, OGS, TRN)
Overview
In 2007, Croatia adopted important regulations to support development of renewable energy projects required to meet the goal of the minimal share of 5.8% of the renewable energy in the total electric energy supply by 2010. The overall size of the renewable electric energy projects is about 330 MW of new capacity in the next three years, estimated to cost 400-500 million euros. Numerous private sector investors have submitted over a hundred projects for preliminary approval to the Ministry of Economy, 90% of which are for wind farms. During the first half of 2008, the Ministry is expected to publish the list of approved project holders. German and Austrian investors and equipment suppliers are very active in the market, mostly in partnership with local companies. Croatian reputable electric industry manufacturer Koncar has been developing its own production of wind turbines.
Best Prospects/Services
According to the Ministry of Economy, the most competitive renewable energy plants in Croatia would be: for electricity generation – wind farms and biomass cogeneration; for heat generation – biomass heat plants and solar thermal collectors; for transportation sector – liquid biofuel plants. Secondary best prospects would be: for electricity generation – small hydro plants (less than 10MW), geothermal cogeneration and solar photovoltaic plants; for heat production – geothermal plants.
In December 2007, the Global Environment Facility trust fund of the International Bank for Reconstruction and Development has approved another grant of $5.5 million for preparation of renewable energy resource projects (primarily biomass and small hydro plants). Given the relatively limited practical experience with renewable energy projects in Croatia (except in the wind and hydro sector), many non-expert investors will likely rely on foreign consultants for project selection, development and management.
Opportunities
Following the European Union directive 2001/77/EC, Croatia has committed to have at least 5.8% of its gross electric energy produced from (non-conventional) renewable sources by the end of 2010 (currently 1.8%). To meet this goal, a total of about 330 MW in new capacity will have to be installed during the next two-three years, for which estimated required investments amount to 400-500 million euros. With five regulations adopted in 2007, the Croatian government specified the types of power plants that will be supported, the feed-in tariffs, the sources of funding the incentives, and the procedures for interested investors to obtain permissions for exploring sites, building plants and connecting them to the grid.
The investors were requested to report their ongoing project activities and plans for approval to the Renewable Energy Resources Department at the Ministry of Economy, Labor, and Entrepreneurship, which is now in charge of the Registry of Projects and Plants for use of Renewable Energy Sources and Cogeneration and of Eligible Producers. In November 2007, the Ministry reported that the applications from investors have five times exceeded current grid and incentives limits. By then, the Ministry had received 112 applications for a total of about 2000 MW of capacity in renewable energy plants (of which 90% for wind plants), which is a truly impressive number given that current total electric power generation capacity in Croatia is about 3,700 MW (60% hydro, 40% thermal). However, experts do estimate that, without the current grid and incentives limits, Croatia would indeed have a total potential for about 2,000 MW of electric energy capacity from renewable sources (of which about 1,000 in wind power).
The Ministry is currently reviewing the applications and will publish the list of preliminary approved projects and investors, probably during the first half of 2008. With a preliminary approval, an investor becomes a project holder with the exclusive right to test the potential of the specific site and acquire ownership or obtain concession on the eventually state-owned land. The project holder is responsible to follow the preparation and licensing procedure within certain time limits for each step and depending on the site and type of project. The preliminary approvals are granted on a first-come-first-serve basis, and for the sites for which several investors have submitted applications in this “initial call” (at least 7 sites), the Ministry will grant the approval to the one that can document that the first begun project preparation. Per current applications, most of the approved projects will be wind farms, but not more than 85% of the total capacity, which is the government’s limit for a single source of renewable energy.
The regulations for biofuels and solar thermal energy are being drafted and are expected to be adopted in 2008. According to the Ministry, the target share of biofuels in the total annual consumption of gasoline and diesel fuel to be achieved by 2010 will be also 5.8%. The regulation will primarily deal with the quality of biofuels and no incentives are planned.
Resources
To obtain an updated Renewable Energy sector report on Croatia, please contact Damjan Bencic, Senior Commercial Specialist at American Embassy Zagreb at Damjan.Bencic@mail.doc.gov.
Transportation Infrastructure and Related Equipment (TRN)
Overview
Construction is one of the most significant branches of Croatian economy, contributing around 6 percent of the GDP. And although it is one of the most developed sectors, exports it achieved during the Yugoslav times remain something to wish for. Most of the construction equipment is imported, and procurements related to reconstruction works at the airports and ports generally target foreign suppliers.
Best Prospects/Services
Croatia, a country of 4.4 million, hosts approximately 9 million foreign tourists every year on a long stretch of the Adriatic coast and numerous islands. Most of the foreign tourists come from the neighboring countries using their own cars, which contributes to the significance of the road and port infrastructure. That is why the road construction has been the largest infrastructure project in Croatia for several consecutive years. Airports are also spending money rather than wasting time: Dubrovnik airport, serving the most significant tourist destination in the country, has begun spending an estimated total of EUR 30 million on terminal reconstruction; Split airport will spend even more, EUR 50 million, in the next five years; development of the Zagreb airport will probably take more time to complete, being the most complex and expensive of all Croatian airport projects, with an estimated cost of EUR 212 million.
Opportunities
Road construction projects
There are four legal entities managing a total of more than 1,100 kilometers of highways in Croatia. The largest one, controlling approximately 785 km of highways, is the government-owned Hrvatske autoceste Inc. (Croatian Highways, www.hac.hr). Its budget for 2007, as approved by the Government, is estimated at $820 million, of which approximately half will be invested into construction of new highways (68 kilometers). The annual maintenance budget is close to $100 million.
There are three highway concessionaires in Croatia: Autocesta Rijeka-Zagreb (also Government-owned), managing 146.5 kilometers of highways; Bina-Istra Inc. (130km, with another 15 to be constructed); and Autocesta Zagreb-Macelj (60 km, leading from Zagreb towards Austria).
According to the Transportation Development Strategy approved by the Croatian Government, Croatia will have 1.365 km of highways in 2013.
Railways
Regardless of financial difficulties in recent years, Croatian Railways Inc. has ambitious investment plans, the most significant being a construction of railroad from the Hungarian border through Zagreb to the port of Rijeka: the estimated cost for this construction is approximately $3 billion. In addition to that, the management of Croatian Railways plans to invest $800 million into the rolling stock in the period of 2006-2010.
Ports
The Port of Ploče sits at the end of the European Vc corridor; with the construction of highway from the Hungarian border, across Eastern Croatia and through Bosnia and Herzegovina (see map), its importance to the CEE region will increase. In 2006, the Port of Ploče recorded cargo traffic of 3.2 million tons, still well below its all-time high of 4.6 million tons in 1988. The modernization of the Port of Ploče is expected to increase the annual traffic volume to about 7.2 million tons in 2010. At the end of 2006, the World Bank, the EBRD and the Port of Ploče signed an EUR 70m loan agreement for the construction of the multi-purpose container terminal and scattered cargo terminal. The Government of Croatia will add EUR 21 million to the project.
Port of Zadar, the 2nd largest passenger port in Croatia, is also facing reconstruction and relocation – currently it operates next to the very center of the old town, which creates traffic jams and delays. The project cost is estimated at EUR 220 million and will be financed by the German development bank Kreditanstalt für Wiederaufbau (EUR 120m) and the European Investment Bank (EUR 100m). The construction is scheduled to end in 2012.
The Government of Croatia plans to invest a total of EUR 531m in the period from 2006-2013 in six international seaports.
Airport reconstruction projects
Zagreb Airport handled 1.72 million passengers in 2006 and its passenger traffic continues to grow steadily, approaching the 1979 record of 1.9 million passengers.
The management has been considering the possibility to construct the new passenger terminal at the airport in order to provide for the expected traffic increase and compete as a regional hub. This will increase the current terminal capacity of around 2 million passengers per year by 3.3 million passengers. According to the press, the construction of the new passenger terminal will cost an estimated EUR 212 million and the respective tender for the design should be published soon. Although initially it seemed that neither the Government nor the airport have sufficient financial resources to finance the construction, recent statements by the management indicate that Zagreb Airport will finance the project through lending and re-capitalization by the Government and the City of Zagreb. In 2006, the airport employed 850 people and recorded revenues of more than EUR 40 million.
Resources
To obtain an updated transportation sector report on Croatia, please contact
Miroslav Nikolac, Commercial Specialist at American Embassy Zagreb at miroslav.nikolac@mail.doc.gov.
Ministry of the Sea, Tourism, Transport and development – [www.mmtpr.hr]
Environmental Equipment (ENV)
Overview
According to the rough estimates of the Ministry of Environmental Protection, Physical Planning and Construction (MEPPPC) www.mzopu.hr and the World Bank www.worldbank.hr Croatia needs to invest more than US $ 10 billion in the environment sector prior to the European Union (EU) accession. Rough estimates anticipate that the total environmental investment needed to meet average EU standards (waste, water and air) will be at least US $ 1.300 per capita. Studies conducted for the waste management system have estimated total required funding at US $ 2.2 billion, waste water treatment needs have been estimated at US $ 5 billion and air protection US $ 0.56 billion. So far, only some 0.2-0.3% of GDP have been directly invested in environmental protection in Croatia, which is around US $ 30-35 million annually. It is expected that these amounts will increase in line with the practice in developed countries to approximately 1% of GDP.
The co-financing of the environmental protection projects in the Republic of Croatia (RC) is ensured from several sources: the prices of municipal services and specific-purpose charges, the state budget, the budget of self-government units and counties, extra-budgetary funds (the Environmental Protection and Energy Efficiency Fund, Croatian Waters), economic factors, public-private partnership, foreign investments, international assistance, loans and grants offered by international development banks such as the European Bank for Reconstruction & Development (EBRD) and World Bank (WB). Also, the Republic of Croatia’s candidate status for membership in the European Union (EU) has given the possibility of using resources from the EU Pre-Accession Funds. In 2007, Croatia received the EU’s new pre-accession assistance through the IPA-Instrument for Pre-Accession (2007-2013), the single financial instrument for all pre-accession activities. The IPA replaces the former CARDS, PHARE, SAPARD and ISPA programs with emphasis on institution building for structural and rural development. Croatia will have an average of US $ 186 million over the next 3 years via the EU’s IPA.
The major environmental concerns in Croatia are: insufficient level of treatment and coverage for municipal and industrial wastewater, uncontrolled dumping of solid and
hazardous wastes and lack of proper disposal sites, and control of air pollution emissions in industrial areas to meet the current legal limits.
General objectives for water and wastewater management in Croatia in the coming years include:
• Bringing Croatian water management regulations in line with relevant EU regulations.
• Creation and maintenance of Water Information System.
• Extending public water supply to 90% of the population (73% at present).
• Providing wastewater collection, treatment and disposal systems for a population
equivalent of 10.5 million.
• Implementation of further flood control and multi-purpose projects.
• Monitoring of surface and groundwater quality / water pollution control.
With respect to the wastewater treatment, twenty facilities are planned to be built by the year 2010, and there are plans for additional wastewater facilities for towns of 2,000-15,000 inhabitants by the year 2025.
Similar to wastewater treatment, proper disposal of municipal and industrial solid waste is an environmental priority for Croatia. Waste management is the biggest problem in the environment sector in Croatia. Key issues are: increase in solid waste; very limited recycling; unreliable data concerning waste flows and quantities; lack of organized disposal sites. This sector presents a major challenge for Croatia and will require significant efforts during the process of harmonization with the EU acquis. Total amount of produced waste in Croatia is estimated at approximately 13,2 mil. t/year or approximately 2,97 t of waste annually per inhabitant.
According to plans, by 2025 almost the entire population will be included in the organized collection of MW system, recycled and treated MW will grow significantly, and an important reduction of disposed municipal and bio-degradable waste will be achieved.
In accordance with Article 104 of Waste Act (Official Gazette 178/04, 153/05 and 111/06) new legislation for specific categories of waste (waste tires, medical, WEEE, waste oil, end-of-life vehicles, batteries and accumulators) was adopted in 2006. The directive on packaging and packaging waste, adopted in 2005, has been fully transposed and progress in implementation has been significant through the establishment of a new collection system. Landfills (176) remediation has been performed alongside with further establishment of new waste management centers. Gradual organization of 4 regional and 20 county waste management centers with treatment plants and landfills has commenced in 2006.
Concerning air quality, the Air Protection Act (2005) governs air quality management in line with the EU framework directive 96/62/EC on ambient air quality assessment and management. In addition, some implementing legislation has been adopted. The development of the national network for monitoring air quality continued with the addition of new stations to the existing stations in urban and industrial areas. Croatia ratified the Kyoto Protocol in May 2007. Efforts are still needed to limit the growth of greenhouse gas emissions in order to meet Croatia's Kyoto target for the period 2008-2012. Another priority is reduction of acid and other polluting gaseous emissions from major industrial premises such as refineries, petrochemical plants, cement industry and large combustion plants.
Concerning the complexity of the sector, administrative capacity is weak and strategies for financing the significant investments necessary are lacking. The division of responsibilities for operational aspects of environmental protection and lack of coordination between ministries continue to hamper progress.
A new Environment Protection Act was adopted in 2007.
Best Prospects/Services
Improvement and development of the water supply system
Water quality maintenance and monitoring
Sewerage and wastewater treatment facilities
Urban and industrial waste management
Treatment and disposal of hazardous waste
Sanitation of waste disposal sites
Incineration(s)
Opportunities
On-going Adriatic Project (Coastal City Pollution Control) - upgrading of municipal sewage systems and wastewater treatment facilities on the coast.
Inland Waters Project – upgrading water supply services, wastewater services and flood protection measures in municipalities selected from the inland part of Croatia; project commenced in 2007)
Establishment of waste management centers on county (5) and regional (2) levels
On-going remediation and closure of unregulated landfills and dumps.
Remediation and closure of previous industrial sites
Resources
Key institutions in the environmental sector in Croatia are:
· Ministry of Environmental Protection, Physical Planning and Construction; www.mzopu.hr
· Ministry of Agriculture, Forestry and Water Management; www.mps.hr
· Croatian Waters; www.voda.hr
· Agency for Environmental Protection; www.azo.hr
· Fund for Environmental Protection and Energy Efficiency; www.fzoeu.hr
· Croatian Business Council for Sustainable Development; www.hrpsor.hr
For more information on the environmental sector, please contact Dalila Uzelac, the Environmental Technologies Specialist at the American Embassy Zagreb at dalila.uzelac@mail.doc.gov.
Tourism Infrastructure (TRA)
Overview
The annual tourism figures in Croatia are now finally back to the levels before the country’s 1991-95 war for independence, because Croatia is getting increasingly popular as a tourist destination. In the recent past, it was picked up by two independent travel publishers as the world‘s destination of the year – by Lonely Planet in 2005 and by National Geographic (Adventure) in 2006. Croatia’s key tourist attraction is its beautiful, thousand mile Mediterranean coastline, not yet over-built and over-run by tourists, with 1,185 islands (only 66 populated) that are ideal for nautical tourism. As only 15% of the Croatian coastline is urbanized (compared to 70% of the Spanish, French and Italian coastline from Barcelona to Naples), Croatia is advertised in the tourist market as “The Mediterranean as it once was”.
Besides the democratization of the society and the pacification of the region, improved transportation infrastructure has played a key role in putting Croatia back on the map of the key tourist destinations. As the majority of tourists to Croatia come from neighboring countries and traditionally arrive by car, their number has boosted since the completion of modern, four-lane highways from inland to the coast. The highways make it possible for tourists from Austria, Hungary, Italy, and Slovenia to arrive at the Croatian coast within several hours of pleasant drive, and have also made any coastal destination reachable within a day to the driving tourists from most of the other European countries. These highways, passing through a beautiful and completely preserved nature of Croatian mountainous area, have initialized rapid development of the continental tourism (currently representing only 5% of the Croatia’s tourism sector). During the past ten years, ferry-line transportation to the islands has also been significantly improved, airports on the coast have been modernized and direct-flight connections with most major European cities have been established (for example, London is only a two-hour-forty-minutes-flight away from Dubrovnik). Although most of marinas have been upgraded and several new have been built (some of which, such as Marina Frapa received numerous quality of service awards), they are still insufficient to accommodate the rapidly growing number of nautical tourists.
Improvement of accomodation facilities was another key factor in attracting tourists back to Croatia. The majority of the formerly exclusively state-owned hotels and camps have been privatized, renovated and upgraded, and a number of new hotels have been built by local or foreign investors. About two hundred small, family-owned hotels have been built under a very successful, government-sponsored program. Easily accessible loans from the modernized banking system (over 90% foreign-owned) have enabled many local entrepreneurs to open new restaurants, cafes, wellness centers, or entertainment facilities, to build apartments or buy boats and vehicles for rent. Last, but not the least, since foreign citizens have been allowed to buy real-estate in Croatia, many Europeans (and a number of U.S. citizens too) have purchased their own property at the coast and have been using it as a second home. The interest in real-estate is expected to reach its peak once Croatia joins the European Union and NATO, when buying or building properties in Croatia should be much simpler than it is today and when the confidence of potential business investors in the country should be fully strengthened. By that time, however, most of the best opportunities will be already tapped by risk-taking and patient entrepreneurs.
Although the Croatian government has been undertaking many activities to support its tourism sector, in the local press it has been often criticized for not having an effective tourism development strategy that would fully explore the enormous potential of this industry sector. In spite of the increased number of visitors, the Croatian hotel industry seems to be still struggling with low profitability and average wages in the tourism sector are reported to be among the lowest in the economy. Fiscal and monetary policy are often blamed for not meeting the specific needs of the tourism industry development, and so are the administrative and legislative systems in general. But in the other hand, the very short season that boils down rather sharply to three summer months and, in many cases, less-than-modern hotel management should probably be blamed too. Altogether, in spite of significant comparative advantages, Croatia’s tourism seems to be following the pace of development of the country as a whole, resulting in its somewhat slower than expected, but still significant and steady growth.
Best Products/Services
The strong current trends in development of Croatia’s tourism infrastructure include intensive re-construction and construction of four and five-star hotels and luxurious golf resorts, construction of high-end congress centers and family hotels, development of nautical and continental tourism facilities; construction of wellness centers, gaming, sporting, cultural and any other accompanying facilities that extend the tourist season into the months when weather conditions are less favorable and predictable. We believe the planning, design, and management services for such facilities should continue to sell well in Croatia for the next decade. Patient investors might try to take advantage of some of the government-led projects such as privatization of the remaining state-owned hotel & resort companies, reconstruction and upgrade of the former military-owned resorts, or development of Brijuni Rivijera in Istria and a resort on Prevlaka peninsula.
Opportunities
The new Law on Urban Development and Construction that came into power on November 1, 2007 has significantly changed the process of urban planning and issuing of construction permits. The goal was to simplify and speed up the administrative procedures (currently taking from several months to several years), but some initial comments in the press indicate that there might be some confusion and delay until the new law is successfully implemented. Given the complexity of the issues, probably the best way to enter the Croatian market is to begin or partner with some of the locally licensed architecture and construction engineering firms. For potential greenfield investors, it might be also very useful to seek advice and assistance from the Croatian Trade and Investment Promotion Agency (their excellent guide for golf course investors could be also very useful for tourism resort developers in general). Feasibility studies for tourism infrastructure projects, as well as some legal and other assistance can be provided by specialized local consulting companies such as Hotel Partner, Horwath Consulting, HMS International and Consensus (for legal assistance, see also a list of lawyers and a list of public notaries). Golf developers, equipment, and services providers might seek assistance or partner with the specialized local golf development companies such as Golf Zona or Golf Sport Promocija. Assistance in buying real-estate can be provided by local offices of well-known international real-estate consultants such as Colliers, CBRE, Spiller Farmer, or King Sturge. Institute for Tourism and Urban Institute could also be very helpful to investors.
Resources
To obtain an updated tourism infrastructure sector report on Croatia, please contact Damjan Bencic, Senior Commercial Specialist at American Embassy Zagreb at Damjan.Bencic@mail.doc.gov.
Franchising (FRA)
Overview
Although it has been over ten years since McDonald’s opened its first restaurant in Croatia, franchising is yet to become well-known and widely used business concept in this country. Most Croatian entrepreneurs are not yet aware of it, do not recognize the value that a franchisor is providing in exchange for the initial fee and royalties, or are unable to meet the high financial and other criteria imposed by some foreign franchisors. However, several annual Franchise Industry Fairs were held in Zagreb, Croatia’s capital, indicated that a growing number of franchisors are eager to enter the market and are committed to find a way to explore the abundant opportunities that it offers.
Best Products/Services
Best prospects for franchising opportunities are likely in the sectors connected with travel and tourism such as food and beverages, automobile servicing/equipment, transportation services, marine services, recreation services, hotels and motels, maintenance services, etc.
Opportunities
Although the average living standard of Croats still has a way to go to catch up with the one of the citizens of the developed West-European countries, lifestyle and cultural patterns are similar. Thus, the franchises that have been working well in the Western Europe are likely to be successful in Croatia too. Croatia has a modern banking system (of which over 90% is owned by foreign banks) and financing is readily available to Croatian entrepreneurs. However, there are some complaints that bankers do not yet have sufficient understanding of the specific needs of the franchise industry. According to the Croatian Franchise Industry Association, most Croatian entrepreneurs would not be able to invest more than 50,000 Euros into a franchise business.
Resources
To obtain an updated franchise sector report on Croatia, please contact Damjan Bencic, Senior Commercial Specialist at American Embassy Zagreb at Damjan.Bencic@mail.doc.gov.
Recreational Boating and Equipment (PLB)
Overview
With the rapid recovery of the Croatian tourism industry and the economy in general, the demand for recreational boats and equipment has been growing significantly during the past several years. Croatia has a huge potential in nautical tourism and boat chartering has been among the fastest growing industry sectors. Most of the boats and equipment are imported from the European Union and the United States, but local production has been rapidly developing as well. The overall size of the market is estimated at about $150 million annually. There are four specialized local nautical fairs held every year and there are six monthly nautical magazines available in the Croatian language and over twenty in foreign languages. There are no major tariff or non-tariff market entry barriers and there is a sufficient number of capable local distributors specialized in recreational boats and/or equipment that would be effective partners/representatives for U.S. exporters..
Best Products/Services
According to some boat distributors, affordable motorboats of up to 20 feet and more luxurious motorboats of 30 feet up are the easiest to sell. Sailing boats no longer sell as well as they did a few years ago, especially if they are not adjusted for charter business (currently, even the boats available for charter exceed the demand).
Equipment distributors report that low price is still the key selling factor and that local boat builders are their increasingly significant customers. As the number of more luxurious and sophisticated boats in the area steadily increases, boat builders also engage more heavily in maintenance and repair services. For this, they lack modern tools and know-how. Opportunities also lie in the area of equipment and know-how for services provided at marinas, where nautical tourists report significant room for improvement. Environmental protection equipment at marinas becomes increasingly important as Croatia prepares to join the European Union and adopts its environmental protection standards.
Opportunities
From a nautical tourist’s point of view, Croatia’s coastline is arguably one of the most beautiful in the world. Along almost a thousand nautical miles there are 1,185 picturesque and easily accessible islands of which only 66 are populated (the most attractive areas are the national parks Brijuni, Kornati, and Mljet). Within every 5 nautical miles, there is some kind of port with a berth for safe overnight or for shelter from bad weather conditions. Coastal mild Mediterranean climate allows for at least a six-month period for comfortable sailing, fishing, cruising or diving in the unpolluted sea (from early April to late October).
Development of nautical tourism in Croatia began in 1983 with the founding of Adriatic Croatia International Club (ACI) that built the initial system of 16 marinas along the coast. Today, there are over 50 marinas (of which 21 belong to ACI, not yet privatized), with a total of over 15,000 sea berths and 5,000 dry berths. Along with berths at other ports, the total number of berths suitable for nautical tourists in Croatia is about 30,000. However, this is no longer sufficient to satisfy the rapidly growing demand. There are waiting lists for permanent berths at most marinas and in the peak summer season, finding a free berth at a nearby marina or at any other port is a premium for many nautical tourists cruising along the coast. This is mainly because boat chartering has been among the fastest growing industry sectors in Croatia in the past several years and construction of new marinas has not followed that pace. Since 2000, the number of charter companies has grown from about 80 to over 320 and the number of boats they offer for rent has grown from about 500 to over 2,400.
While over 90% of charter customers are foreign tourists and over 80% of the boats in charter are sailing boats (mostly 32-40 feet), domestic population has been more inclined to all kind of motorboats. The coastal population, as well as many Croats that live on the continent and own some real estate at the coast, use boats primarily for quick access from the coastal residence to their favorite swimming, fishing, or diving site and they only occasionally overnight on the boat. The number of foreigners buying real estate property at the Croatian coast has been rapidly growing in the past several years and many of them purchased a boat as well.
After a decade of a post-war early-capitalism-style economy in Croatia, owning a boat has become a matter of prestige for many entrepreneurs, managers and professionals. Local banks stay readily available to finance boat purchases and many dealers offer boats on leasing (with tax advantages for companies). The significant increase in domestic demand for boats has not only boosted imports, but also the local production. A number of small, family-owned boat builders have emerged during the past decade, manufacturing increasingly competitive boats tailor-made to local maritime conditions. About 90% of boat equipment and raw materials for this production is imported.
Resources
To obtain an updated recreational boating and equipment sector report on Croatia, please contact Damjan Bencic, Senior Commercial Specialist at American Embassy Zagreb at Damjan.Bencic@mail.doc.gov.
Wellness & Spa Equipment (HCS, SPT, HTL, WRE)
Overview
There has been a dramatic increase in the number of wellness centers in Croatia during the past few years and there are about 65 of them. The size of the wellness & spa equipment market is estimated to about $10 million annually. Most of the equipment is imported from Germany and Italy. Croatia has tremendous potential for tourism development by extending its short tourist season and the development of wellness services could play the major role in this endeavor. New specialized wellness magazines, web portals and trade events are emerging every year, promoting the concept to the local population. There are no major tariff or non-tariff market entry barriers and there is a sufficient number of capable local distributors specialized in wellness equipment that would be effective partners/representatives for U.S. exporters.
Best Products/Services
According to Centar za estetiku Opatija, the Croatian wellness model is a mixture of Western (intensive investment in interior, plenty of equipment, fewer therapeutical treatments) and Eastern (more labor intensive, fewer treatments relying on equipment, mystical simplicity of interior decoration). Croatia’s highly educated labor force is relatively inexpensive, and wellness centers employ a number of physical therapists, cosmeticians, and physicians. Therapeutical treatments are equally important as saunas, massage spas and swimming-pools.
Wellness professionals say that there is already plenty of high-quality wellness equipment offered in the market. The first wave of investments is passing away and wellness centers are now focused on attracting customers, so putting a new product on the market is no longer easy. Best prospects would probably include products that are truly unique or have a really strong advantage compared to the competition, then products that can be used with sea-water, and products that can be used as a part of the continental tourism where Croatia has a huge unexplored potential. Recently-built highways from inland to the coast are passing through a marvelous landscape of unpopulated mountains and woods of Lika and Gorski Kotar, making it accessible from the capital city Zagreb in a hour or two and ideal for weekend wellness centers. Wellness know-how, perhaps in partnership with some of the capable local wellness educational and consulting companies, could also sell well.
Opportunities
Wellness & Spa has been among the most rapidly growing services industry sectors in Croatia. While Croats have been enjoying their thermal springs for centuries and have used public swimming pools, saunas, cosmetic and massage saloons, solariums, and fitness and healthy-lifestyle centers for decades, the more sophisticated combination of these elements – defined as wellness – has only recently become popular. Since 2000, when the first wellness center was opened at the Millennium Hotel in Opatija, the number of centers has been doubling every year, to reach a total of 38 wellness centers located in hotels in mid 2006. According to Spa Wellness Academy in Lovran (which designed the first wellness center), by September 2006, the total number of wellness centers (including independent city centers and those located at medical-rehabilitation centers) has reached 65 and there are about 20 additional in construction.
Wellness centers could play a major role in extending Croatia’s short tourist season by providing hotel guests with additional opportunities for rest and recreation when the weather conditions are not suitable for outdoor activities. Because of the lack of indoor activity and entertainment, the tourist season in Croatia is limited to summer months, creating the average occupancy at hotels of less than 50%. The relatively short season represents the major obstacle to further development of tourism, the key industry sector that generates about a quarter of Croatia’s Gross Domestic Product (estimates for 2006 are: 10 million international tourist visitors to Croatia, generating about $6.3 billion of revenues). Recent research undertaken by Horwath Consulting in Zagreb indicated that only one fifth of Croatian hotels have wellness centers and only half have swimming pools. This is considered to be much below the industry standards and offer significant room for improvement. Indeed, the hotel industry recognized this opportunity, acted accordingly, and in 2005 reported a 55% increase in sales of wellness packages (average 3 night stays).
Resources
To obtain an updated wellness & spa equipment sector report on Croatia, please contact Damjan Bencic, Senior Commercial Specialist at American Embassy Zagreb at Damjan.Bencic@mail.doc.gov.
Agricultural Sector
Overview: Miscellaneous Consumer Foods
Croatia’s total imports in this category jumped from $768 million in 2003 to over $1 billion in 2006*. In the last few years flourishing tourism at the Dalmatian coast and rebounding consumer demand in urban areas are fueling demand for consumer foods which is underlined by the increasing number of supermarkets.
Trade statistics on American exports to Croatia in this category are severely understated due to transshipment via the EU. Demand for medium to high quality consumer foods will continue to rise and should be a boon for American companies, provided they can overcome less than competitive high ocean freight rates into the Adriatic Sea from U.S. ports. U.S. companies can take advantage of the weak dollar.
Web Resources
(Ministry of Agriculture, Forestry and Water Management – http://www.mps.hr
Ministry of Health and Social Welfare – http://www.miz.hr
Foreign Agricultural Service – http://www.fas.usda.gov
Gastroteh - 2009 - International Fair of Gastronomy, Hotel and Hospitality Equipment and Catering at Zagreb fair – http://www.zv.hr/
Vinovita – May, 07th to 11th, 2008 - 11th International Fair of Wine and the Equipment for Viticulture and Viniculture at Zagreb fair –http://www.zv.hr
Zagreb International Autumn Fair – September, 16th to 21st, 2008 – http://www.zv.hr
Andreja Misir, Agricultural Specialist at the U.S. Embassy in Zagreb, andreja.misir@usda.gov
Overview: Fish & Seafood
Imports of fish to Croatia are quite significant although Croatia exports seafood (mostly tuna fish to Japan). Moreover, Croatia’s seafood imports increased from $83 million in 2003 to $105 million in 2006 and this trend is expected to continue. In addition, Croatia imports annually, between $2 to $4 million of seafood from the United States.
The tourism industry, mostly located at Croatia’s Adriatic seacoast, has a greater demand for seafood than local supplies can meet thus a large proportion of the seafood and fish consumed on the Adriatic Coast is in fact imported and not caught locally (though most tourists do not realize this). Demand is particularly strong for medium-quality products, as tourists tend to be ‘mid-budget’ travelers. Consumption should continue to grow along with tourism for the next several years, as the country remains a somewhat lower-cost alternative to Italy for beach-bound tourists and thus attracts visitors. Consumption of sea and fresh water fish in 2006, according to the Croatian Statistical Institute, was 7.19 kilograms per capita plus additional 0.85 kg per capita of seafood and 1.01 kg per capita of dried, smoked, salted and other preserved or processed fish. The Croatian Government has made increasing fish consumption a strategic goal.
Web Resources
Ministry of Agriculture, Forestry and Water Management – http://www.mps.hr
Ministry of Health and Social Welfare – http://www.miz.hr/
Foreign Agricultural Service – http://www.fas.usda.gov
Gastroteh - 2009 - International Fair of Gastronomy, Hotel and Hospitality
Equipment and Catering at Zagreb fair – http://www.zv.hr
Zagreb International Autumn Fair – September, 16th to 21st, 2008 - http://www.zv.hr
Andreja Misir, Agricultural Specialist at the U.S. Embassy in Zagreb, andreja.misir@usda.gov
Overview: Soybeans and Soybean Meal
Resurgence of Croatia’s poultry and swine industries has stimulated demand for soybeans and soybean meal. Soybeans are imported into the port of Zadar where the largest soybean crushing facility in Southern Europe is located (capacity is about 250,000 MT annually) and the port of Rijeka. After they are crushed, the soybeans are shipped throughout the western portion of the Balkans. Price and credit availability are the major determinants for sourcing. At the moment only GMO-free soybeans are acceptable for the Croatian market. Domestic soybeans tend to produce lower quality meal having a protein content between 34 to 38 percent.
Web Resources
(Ministry of Agriculture, Forestry and Water Management – http://www.mps.hr
Ministry of Health and Social Welfare– http://www.miz.hr/
Foreign Agricultural Service – http://www.fas.usda.gov
Zagreb International Autumn Fair – September, 16th to 21st, 2008 – http://www.zv.hr
Andreja Misir, Agricultural Specialist, andreja.misir@usda.gov