Pašalić: The Government is Undermining Its Own Strategic Project with New Law

The new Spatial Planning Act will create some absurdities, calling into question investments that the Government itself previously declared strategic. This is the view of Franjo Pašalić, an investor in energy, shipbuilding, and owner of Frapa marinas in Rogoznica and Dubrovnik, who issued a statement on Wednesday regarding the Šibenik-Knin County’s attitude towards his Medine project and the amendments to the Spatial Planning Act.

Pašalić states that the amendments to the Act jeopardize an investment worth €300 million, which was soon to commence realization. To make matters more bizarre, it was the Government of the Republic of Croatia that marked Pašalić’s project as strategic a few years ago. It is worth noting that investors in luxury tourism in Croatia have reacted sharply to the proposed amendments to the Spatial Planning Act, which foresee a ban on fractional ownership within tourist zones.

Unfavorable for Investment

In their opinion, such a decision would completely disable the existing financing model for large tourism projects, as investors would lose the ability to sell individual villas, apartments, or residential units – which has been a key mechanism for closing investment structures in practice. They emphasize that adopting the law in this form would make Croatia one of the least favorable countries for investments in luxury tourism, especially compared to other Mediterranean destinations where fractional ownership of tourist complexes is permitted and legally regulated.

They see an additional problem in the legal collision, as fractional ownership is primarily regulated by the Property Act and other real rights, so restrictions within the Spatial Planning Act would create legal uncertainty. Investors warn that such regulation could lead to the abandonment of projects worth several billion euros, slow down the development of luxury tourism, and result in the loss of numerous jobs.

In Rogoznica, Pašalić’s Medine project, valued at €300 million – the largest and most luxurious resort in Croatia – was soon to emerge, which, according to Pašalić, already has a signed pre-contract for franchising with the most prestigious hotel brand in the world. The Medine resort, with a total capacity of 1,100 beds, spans an area of 12 hectares and a coastline of 470 meters, including 1.2 hectares of beach under concession.

Pašalić states that he never suspected that he would literally encounter ‘bureaucratic vanity, lawlessness, and extortion’ every day. – And to witness a proposal for a new law that would destroy the essence of Croatian luxury tourism, which our rulers persistently refer to – says Franjo Pašalić.

Still Waiting for Permits

He first shared his experiences with the Šibenik-Knin County. – When we started the project, an Urban Development Plan (UPU) for Medine was being developed, which detailed the space and defined it. During the preparation of that document, it was very clearly stated that an environmental impact study was not required for the project; however, at the moment of submitting the request for a location permit, that position suddenly and inexplicably changed. We literally lost two years corresponding with the county and ultimately had to undertake the study and its costs, which took more than half a year and ultimately officially proved that our project is sustainable and in accordance with all ecological standards. The study was completed six months ago, and the county still has not done its part to move the matter to public discussion, which is a prerequisite for obtaining the location permit and starting construction — warns Pašalić, reminding once again that it was the Government that marked the Medine project as strategic, which in formal terms guarantees the acceleration of administration and maximum ‘centralization’ of decision-making.

Lider has requested a response from the governor of Šibenik-Knin County Paško Rakić, regarding these claims. Once received, we will publish it.

Franjo Pašalić states that he has contacted the county multiple times and, upon insistence, was received for a meeting where nothing was concretized again. – I wonder who will be responsible for the damage caused by the accumulation of costs. Every day we lose tens of thousands of euros because someone does not want to do their job. I publicly ask everyone – what is the problem? We are not asking for privileges; we are asking for respect for the law and reasonable deadlines. Decision-makers need to be aware that the prices of materials and labor are rising every day and that delays multiply costs – adds Pašalić.

Speaking about the aforementioned fractional ownership and the proposal for a new law, Pašalić states that it is not at all about ‘protection from apartmentization,’ which has become a populist phrase that protects the interests of certain tourism stakeholders, as that protection is implemented in a different way. – The UPU developed for Medine very clearly and explicitly defines the possibility of fractional ownership, and this has also been legally confirmed by the Government marking our project as strategic. Now it turns out that the entire project is on the verge of blockage because fractional ownership in tourist zones would be prohibited. This is absurd and a precedent! The new law does not define what status projects that have already started would have. It is full of legal gaps and illogicalities that imply it was tailored by some lobbying group – claims Pašalić.

Who is Behind the Law?

In his opinion, even if fractional ownership is allowed for projects that have an UPU, that provision remains too abstract, extensive, and insufficiently specified. The question then remains why the Government, for example, gave camps a ten-year adjustment period to the new legislation in the amendments to the same law, while a theoretical hotelier who wants to start investing in the spring of next year will not be able to fractionalize the project. – This can be seen as favoritism – believes Pašalić.

He claims that everyone knows who is behind the amendments to the law, but they prefer not to talk about it. – The entire investor and tourism scene has been buzzing for months about who is behind the new law. Of course, it is not about protecting the coast from apartmentization, as our ministers know very well that it is not the same to have something that is formally, in legal terms, called an apartment within a five-star resort or to have an apartment in an illegally built house without a facade. This is a cliché used to gather political points from the people who cannot understand the legal complexity! Everyone knows that the proposal for amendments to the law came from those players who do not want to allow competition to expand and invest in a residential sense. It is not difficult to detect who those players are and who among the tourism investors here has not been the only one to rebel. I think the public needs to know who is behind it all, as it would be detrimental to democracy and society as a whole to enact laws that favor particular groups – says Pašalić.

If the conditions do not change, the investor says he will be forced to suspend the Medine project. – All Croatian investors will absolutely withdraw their investments at this moment. Because this is not a normal climate for investment. Is it possible that Croatia is the only country in the Mediterranean that would go into such legislation? Money will go to other countries. Currently, investors intend to invest around €5 billion in Croatia over the next few years and employ more than three thousand people. With the new law, everything would disappear in an instant – explains Pašalić.

He claims that Croatian tourism has been stagnating for decades due to an outdated socialist concept that privileges private accommodation at the expense of hotel and resort tourism.

Prerequisite for Tourism Development

– Today, as much as 80 percent of capacity consists of private accommodation, while hotels and resorts bear the main burden of investment, regulation, and sustainability. Instead of encouraging planned and responsible development, the system continues to reward improvisation, bureaucracy, and illegal construction. The example of the Medine project in Rogoznica shows that domestic investors can build sustainable, energy-independent, and globally competitive resorts, but they are administratively prevented from working. Croatia should finally realize that order, quality, and long-term sustainability are not a threat but a prerequisite for the development of a new generation of tourism. It is time for a strategic turnaround in Croatian tourism – from a mass, low-budget model to high quality, sustainability, and domestic entrepreneurship – believes Pašalić.

An additional argument in favor of luxury tourism is the fact that tourists in private accommodation spend €15 to €20 per day, while guests of luxury resorts spend between €150 and €300.