Pejnović: We estimate that we will reach an agreement with MOL

At the continuation of the Lider conference Day of Big Plans, in the panel Makroskop, there was more discussion about trends, business opportunities that entrepreneurs can find in the public sector, and the banking policy in 2014.

The path to recovery will be slow, there will be quite a few bad news, and the eurozone will have the hardest part of the recovery, emphasized Alistair Teare, director of Deloitte for Central Europe, speaking about global trends. He expects that the recovery will be led by the USA and China, while the eurozone will lag behind.

“A major achievement will be keeping the euro alive. The main hope for Europe is exports, both within the eurozone and outside it. The same applies to Croatia. Be more competitive and better, focus on what you have,” Teare advised.

However, optimism exists, sometimes more, sometimes less. The number one priority is to increase revenues in the markets, and the trend of reducing costs will continue. Another direction of optimism can be found in EU fund programs. It is important to access those funds, which largely go to research and development.

“Industrial policy is returning to focus, it is important for innovation and should focus on domestic markets. Start producing, bring innovations, establish small businesses… We need to encourage people to take risks and create an environment conducive to opening companies. The state-owned ones are inefficient,” concluded Teare.

Eurozone has gone through the worst

With trends and the situation in the region in 2014, Vladimir Gligorov, a professor at the Vienna Institute for International Economic Studies, added that the eurozone has gone through the worst. The fiscal balance in Germany is far more positive than in other regions. Germany has significant consolidation of public spending, which is one of the reasons for the significant slowdown in growth in the eurozone.

Regarding the future, Gligorov says that nothing particularly can be expected from fiscal stimulus, nor from public spending, and there is great uncertainty about the survival of the euro. An additional reason why significant recovery should not be expected in the peripheral EU countries is that with the change of the development model, lending from developed countries to less developed ones has been halted. In the last year, there has been a capital outflow from most Central EU countries, banks are deleveraging, etc. All this awaits a region that must reorient its entire growth strategy.

Regarding the sustainability of public finances, Gligorov says that the relationship between the interest rate and the growth rate is important. The current situation with the deficit is unsustainable and creates pressure on public spending and generates all other problems. The same situation applies to external debt.

He reiterated that for countries like Croatia, no growth faster than three percent is expected by 2015. He says that, more or less, we can talk about a lost decade. Why is that so?

“Private consumption whose growth cannot be particularly high, and secondly because the problem with the employment rate will be more permanent. In Croatia, there has been a significant reduction in the employment rate, and it will take quite some time to get these things in order,” predicted Gligorov, noting the importance of net exports which largely depend on the European environment and investments that are not recovering.

How to stimulate the private sector

Private investments, he continued, need to be the growth generator, but for now, there is none of that, and that is the main problem, especially for transition countries that have become accustomed to foreign investments. The business climate is important, but he says the key question is how to stimulate the private sector to invest.

“As long as there are no serious investments, the recovery will be very slow. Next year will not be much better than this one. In terms of the medium term, projections are optimistic, and regarding the long term, everything depends on the assessment of the growth model that must be based on domestic private investments, possibly with public sector investments,” concluded Gligorov.

After the trends, Mladen Pejnović, head of the State Office for Management of State Property, focusing on state property as a potential lever for development in 2014, spoke about the strategy for managing and disposing of state-owned property, the registry, and portfolio organization, and stated that this year he will strive to be executive.

As for business opportunities for entrepreneurs, he reminded that the Law on Strategic Investments is being prepared, privatization of airports and seaports will be opened, and for all others, he says they will be ready to immediately initiate procedures upon the first expression of interest. Likewise, the state co-owns a large number of real estate and has opened the possibility for them to be sold to majority owners, there is interest in military real estate as well. They will continue to grant concessions for entrepreneurial zones.

It is much harder to negotiate a new marriage

In a few short questions from the chief editor of Lider, Miodrag Šajatović, it was heard that the sale of state property could contribute about three billion kuna to budget revenues in 2014, and regarding the public disclosure of contracts, rights, and obligations contained in them, Pejnović says he cannot promise that the contracts will be fully disclosed.

One question was also related to negotiations with MOL and the most likely outcome.

“If we can correct past mistakes with the partner, good. If not, we will have to divorce. However, the estimate is that we will reach an agreement. It is much harder to negotiate a new marriage,” Pejnović replied.

The last lecture in the Makroskop panel was given to the banking sector, specifically Markus Frestl, CEO of Hypo Alpe Adria Bank, who spoke about the banks’ policy in the coming year.

“The sector is stable, secure, and well-capitalized. Deleveraging will continue in 2014 in the corporate and private sectors. Banks should see growth in microloans, and they should also reduce interest rates. They are struggling with increased risks and will not start lending until non-performing loans are resolved and the economy recovers. It will be a bloody year in terms of bank profits, there will be mergers and acquisitions, medium and large banks will likely increase their presence, and some may exit the Croatian market,” is his forecast.