Viktorija Zinčuk: For small and medium enterprises, EBRD as a shareholder is still not an easily acceptable idea

Negative trends and poor economic forecasts have so far bypassed Croatia, and judging by the projections of numerous institutions, from the European Commission to the International Monetary Fund, we will avoid recession this year and next. And likely grow twice as fast as the EU average. Why Croatia is currently a safe haven, isolated from negative trends, and how sustainable the current economic model largely based on tourism is in the long term, we discussed with Viktorija Zinčuk, head of the Zagreb office of the European Bank for Reconstruction and Development, which has recently also been managing the bank’s operations in Slovenia, Hungary, Slovakia, and the Czech Republic. We also sought an answer to the question of why EBRD has not entered into ownership of companies in Croatia more so far, whether it plans to support any domestic private equity fund, and discussed several urban regeneration projects that have been of interest to the bank. We touched on the topic of managing state-owned real estate and, of course, the inevitable reforms and changes that the Croatian economy is crying out for.

– In 2022, we invested 297 million euros in Croatia, which is a record year for our investments in the private sector (82 percent of the annual business volume in the country). Among other activities, we led in supporting innovative projects, including an investment of 57 million euros in renewable energy production in the Zadar region, we supported the expansion of the Studenac retail chain, we invested in the first Croatian sustainability-linked bond issued by Meritus Investments and the first sustainable bond in Croatia issued by RBA. We also provided the City of Zagreb with a loan of 50 million euros to support municipal enterprises. In 2023, we will continue to fulfill our ambitious plan, encouraged by the fact that the Zagreb office is now the regional center of EBRD for Central Europe, which includes Hungary, Slovenia, Slovakia, and the Czech Republic in addition to Croatia.

– It is a combination of several factors. For small and medium enterprises, awareness of EBRD as a shareholder is still not an easily acceptable idea. Our criteria are very rigorous and not everyone can meet them. It is also a fact that for the past seven years, commercial bank interest rates have been so low that companies have not been too interested because equity capital is the most expensive source of financing. Furthermore, EBRD never takes a majority stake in a company, and our investment must be at least 10 million euros, so there have not been many opportunities for investment. Although we are selective with such investments, we are very interested in them. We are currently working on some investments of that kind, but it is still too early to talk about them. On the other hand, we have indirectly invested in some smaller companies through PE funds.

– Our role regarding Gredelj is advisory, and since there is still no project for Gredelj, financing is not an option anyway. Even before I came to Croatia, there was talk about Gredelj. And it has always been discussed in the context of Gredelj, at least one of its parts, through the lens of cultural heritage protection. Although, honestly, I do not understand what exactly is being attempted to be protected considering that most of it is already completely devastated and collapsed. During the previous city administration, we engaged a considerable number of consultants, including 3LHD, PwC, lawyers, to explore the possibilities for the development of a broader scope of Gredelj. The area of that land is the size of the city of Dubrovnik. We looked at what could be done there. However, at that time, there was no interest shown in giving a new function to that space. Regardless of what is placed there, residential buildings or something else, its importance remains significant. The current mayor of Zagreb positions Gredelj as a strategic project for the next term. EBRD is ready to assist him if the implementation begins and our participation is needed. Gredelj is a huge project, and realistically, a lot of preparation is still needed to realize it with full cooperation from the City and the state. Since the time when New Zagreb was built, unfortunately, there has not been a more serious urban project in Zagreb. If the mayor succeeds in revitalizing that area, it will be a significant game changer.

– Šibenik is at an advanced stage with the project. Large brownfield projects require time and good preparation, which takes years. The final preparations are now being made in Šibenik, and we hope for an upcoming international tender. This project would have been difficult to realize without our support. In this room where we are sitting now, three years ago, the representatives of the owners sat, and we easily agreed to start the project together. It should also be noted that the situation there was much simpler because there were only two landowners. Unlike Gredelj, where there are many ‘cooks’, Šibenik was fortunate that this was not the case.

– The renewable energy sector has one of the greatest potentials in Croatia, which has attracted and will attract many investors. Although slowly, changes have begun to occur in that area, which is positive because nothing was happening a few years ago. Today, things are not happening fast enough, but visible progress is being made. Since most new renewable energy capacities are being developed in southern Croatia, and most electricity consumption centers are located in the continental part of the country, the existing transmission network needs to be upgraded to absorb new renewable energy sources. Namely, the capacity of the existing transmission network will soon not be able to keep up with the development of energy from renewable sources. If investments are not made in the electricity grid, it will become a bottleneck for the development of renewable energy sources. However, where there is a will, there is a way. Evidence of this is Croatia’s entry into Schengen and the eurozone. This required significant changes, but Croatia managed to implement them.

 

Read the entire interview in the new printed and digital edition of Lider.