June, 2005June, 2005

CONTENTS:CONTENTS:

I STATISTICAL PROFILEI STATISTICAL PROFILE

II II CITY OF ZAGREB ECONOMIC DEVELOPMENT CITY OF ZAGREB ECONOMIC DEVELOPMENT STRATEGYSTRATEGY 1. INVESTMENT IN THE CITY OF ZAGREB1. INVESTMENT IN THE CITY OF ZAGREB

2. RESTRUCTURING AND PRIVATIZATION OF2. RESTRUCTURING AND PRIVATIZATION OF COMPANIES OWNED BY THE CITY OF ZAGREB COMPANIES OWNED BY THE CITY OF ZAGREB 3. DEVELOPMENT INITIATIVE FOR CRAFTS, TRADES, 3. DEVELOPMENT INITIATIVE FOR CRAFTS, TRADES, AND SMALL AND MEDIUM-SIZE ENTERPRISES AND SMALL AND MEDIUM-SIZE ENTERPRISES IN THE CITY OF ZAGREB IN THE CITY OF ZAGREB

4. CREDIT-WORTHINESS ENHANCEMENT PROGRAM4. CREDIT-WORTHINESS ENHANCEMENT PROGRAM

I CITY OF ZAGREB STATISTICAL I CITY OF ZAGREB STATISTICAL PROFILEPROFILE

• Dominant economic, financial and political Dominant economic, financial and political role in the Republic of Croatiarole in the Republic of Croatia

• 18% of Croatia’s total population18% of Croatia’s total population

Croatia 4.43 million inhabitantsCroatia 4.43 million inhabitants

ZagrebZagreb 779,000 inhabitants779,000 inhabitants

City’s share in Croatia’s GDPCity’s share in Croatia’s GDP

estimationestimation

Zagreb33%

Republic of Croatia

67%

Republic of Croatia

Zagreb

Source: City Office for Development Planning and Environment Protection, CNB

Croatia’s GDP: 34.308,9 mil US$Croatia’s GDP: 34.308,9 mil US$ (per capita: 7.722 US$)(per capita: 7.722 US$)

• Cost-of-living index is lower than the national averageCost-of-living index is lower than the national average• Average net salary is above the national averageAverage net salary is above the national average• Unemployment level is lower than the national averageUnemployment level is lower than the national average• Diverse economyDiverse economy

Source: Croatian Chamber of Commerce - Zagreb Chamber

INDUSTRIAL OUTPUT (STRUCTURE)

80,66%

19,27%0,07%

Processing industry

Power, gas and water supply

Mining and extraction

Source:City Office for Development Planning and Environment Protection, CNB

PROCESSING INDUSTRY(Sector structure and output indices for I-III 2005/I-III 2004)

25,7%

0,8%

2,5%6,3%

12,0%8,3%

4,8%

28,7%

1,4%2,4%

2,8%

4,2%

Food and beverages (Index 101,4)

Textile industry (Index 92,6)

Clothing industry, fur finishing and dying(Index 76,1)Pulp, paper and paper products (Index125,7)Publishing and printing industry (Index138,4)Chemicals and chemical products (Index56,3)Other non-metal mineral products (Index91,2)Metal products (Index 63,4)

Machines and devices (Index 110,0)

Electrical machines and appliances (Index90,9)Broadcasting and communicationsequipment (Index 110,4)Other

Source:CityOffice for Development Planning and Environment Protection

EMPLOYMENT BY SECTORfor public and private organisations

Processing industry19,2%

Trade19,1%

Transportation, warehousing and communications

8,8%

Real estate transactions

8,4%

Education7,9%

Construction industry7,7%

Health care and social welfare7,7%

Administration5,7%

Other3,6%

Other public, social and educational services

5,3%

Hospitality industry2,2%Financial services

4,4%

• Zagreb City Budget for 2005Zagreb City Budget for 2005 € 743.421.000 € 743.421.000

STRUCTURE OF REVENUES AND RECEIPTS IN THE 2005 BUDGET

70,2%

0,0%7,8%

13,5%

1,1%4,4% 0,1%2,9%

Tax revenues

Supports

Propery revenues

Revenues from administrativefees and under special regulations

Sales of non-manufacturedassets

Sales of manufactured assets

Borrowing receipts

Other revenues

STRUCTURE OF EXPENDITURES AND OUTLAYS IN THE 2005 BUDGET

1,0%9,3%0,7%3,6%1,0%

19,1%

1,3%5,9%

15,7%17,9%

24,6%

Personnel expenditure

Material expenditure

Financial expenditure

Subsidies

Supports

Benefits paid to citizens andhouseholds from the the Instituteand the BudgetExpenditure for the procurementof non-manufactured assets

Expenditure for the procurementof manufactured fixed assets

Expenditure for additionalinvestment in non-financial assets

Outlays for loan principalrepayment

Other expenditure

II CITY OF ZAGREB ECONOMIC II CITY OF ZAGREB ECONOMIC

DEVELOPMENT STRATEGY DEVELOPMENT STRATEGY

• Investment policyInvestment policy

• City of Zagreb strategic projectsCity of Zagreb strategic projects

1. INVESTMENTS IN THE CITY OF ZAGREB1. INVESTMENTS IN THE CITY OF ZAGREB

• The City allocates considerable funds for the The City allocates considerable funds for the utilities infrastructure and equipment and utilities infrastructure and equipment and installations in City-owned companiesinstallations in City-owned companies

• Loan financing (the legal limit for borrowing is Loan financing (the legal limit for borrowing is 20% of revenues; the current indebtedness level is 20% of revenues; the current indebtedness level is 14%)14%)

Standard&Poor’s:Standard&Poor’s:

• BBB/stable outlookBBB/stable outlook for issuing for issuing domestic domestic currencycurrency bonds bonds

• BBB/BBB/stablestable outlook outlook for issuing for issuing foreign foreign currencycurrency bonds bonds

Moody’s:Moody’s:

• Baa3/stable outlookBaa3/stable outlook for issuing for issuing foreign foreign currencycurrency bonds bonds

The City operates on international capital The City operates on international capital marketsmarkets

FINANCE OF INVESTMENTS

• Budget-financed investment,Budget-financed investment,• Investment financed by City-owned company Investment financed by City-owned company

revenues, revenues, • Investments taken to potential investors by the Investments taken to potential investors by the

City on international capital marketsCity on international capital markets and and• ConConcceesssionssions

INVESTMENT PROJECTSINVESTMENT PROJECTS

DESIGNATIONDESIGNATIONVALUEVALUE(mil €)(mil €)

DESIGNATIONDESIGNATIONVALUEVALUE (mil €) (mil €)

City of Zagreb Wastewater City of Zagreb Wastewater Treatment Plant ( in Treatment Plant ( in implementation)implementation)

177177 Restructuring of Institute for Restructuring of Institute for People with Special NeedsPeople with Special Needs

1111

Solid Waste Incineration Plant – Solid Waste Incineration Plant – SWIPSWIP

160160 Conference Center ProjectConference Center Project 3232

Landfill Rehabilitation Program Landfill Rehabilitation Program ( in implementation)( in implementation)

5656 Commercial/Hotel/Commercial/Hotel/

Residential ComplexResidential Complex

7070

Zagreb Wholesale MarketZagreb Wholesale Market 2929 Lake Jarun Recreational Lake Jarun Recreational Center ProjectCenter Project

33

Low-Floor Tramcar Fleet Low-Floor Tramcar Fleet RenewalRenewal

160160 Sava River Cascades ProjectSava River Cascades Project 750750

University Hospital ProjectUniversity Hospital Project 265265 Urban and Suburban Railway Urban and Suburban Railway ExtensionExtension

150150

Sljeme/Medvednica Mountain Sljeme/Medvednica Mountain ProjectProject

99 Zagreb Thermal SpaZagreb Thermal Spa 3030

Underground Garages Underground Garages 2525

City of Zagreb Wastewater Treatment PlantCity of Zagreb Wastewater Treatment PlantValue – 177 mil €Value – 177 mil €

ZAGREB CENTRAL WASTEWATER TREATMENT PLANT (ZCWWTP)

Within the Central Wastewater Treatment Plant project, the City has provided for and already initiated the efforts to complete the following components of the plant and facilities:the construction of a plant that would include a mechanical facility, an installation corridor, biological plant components and a management and administrative section;the Domovinski Bridge connecting to the existing Radnička road;Čulinečka Street and the construction of a railway underpass;the main low-pressure collector for Novi Zagreb, andMDC – Main Drainage Canal.The total value of this investment has been estimated at € 177,000,000.0. The investor and concessionaire is ZOV – Zagrebačke otpadne vode d.o.o., Zagreb (Zagreb Wastewater Management Company, Ltd.).

Solid Waste Incineration Plant – SWIPSolid Waste Incineration Plant – SWIP

Value – 160 mil €Value – 160 mil €

SOLID WASTE INCINERATION PLANT – SWIPSOLID WASTE INCINERATION PLANT – SWIP Following the international tender for the services of a chief project engineer/consultant, the proposal submitted by a consortium composed of Elektroprojekt d.d. of Zagreb and Novum/UTW of Vienna was selected as the preferred bid.On 9 October 2001, Čistoća d.o.o. (Zagreb’s waste disposal company) and the Consortium concluded a Service Contract for the Chief Project Engineer/Consultant. On the basis of this Contract and a study entitled “Multicriteria Analysis for the Selection of One of the Two Sites Proposed for the Construction of the Waste Incinerator”, the Commission has decided that the Incinerator should be constructed at the Žitnjak-East site.We should note that the Waste Incineration Plant will also be used for the treatment of sludge generated in the Central Waste Water Treatment Plant. According to estimates the annual volume of this sludge would stand at around 70,000 tons. The total value of this investment is estimated at € 160,000,000.00.

Landfill Rehabilitation ProgramLandfill Rehabilitation ProgramValue – 56 mil €Value – 56 mil €

JAKUŠEVEC LANDFILL REHABILITATION PROGRAM

In 1998, the City concluded a Loan Agreement with the European Bank for Reconstruction and Development (EBRD) in order to fund the rehabilitation of the Prudinec/Jakuševec Landfill.The following investment programmes are being implemented through this project:landfill rehabilitation and development of new waste disposal capacities;construction and operation of an emergency pump station;construction and operation of a leachate treatment plant;construction and operation of a degassing station;construction and operation of waste pre-treatment facilities;construction and operation of construction waste recycling facilities;installation and operation of control equipment;investment programme design, monitoring and management.

The total value of the investment is € 56,000,000.00.

Zagreb Wholesale MarketZagreb Wholesale MarketValue – 29 mil €Value – 29 mil €

ZAGREB WHOLESALE MARKET

Following completion of this project, the existing facilities will be replaced by a modern wholesale market adhering to European standards of quality in terms of facilities, equipment and organisation in order to suit the requirements of the day. The new wholesale market would serve as a hub for wholesaling fruit, vegetables and flowers, with potential to expand to other products. The facility will be constructed at a selected location in the area of Žitnjak.

The value of this investment project has been estimatedat € 29,000,000.00.

Low-Floor Tramcar Fleet RenewalLow-Floor Tramcar Fleet Renewal

Value – 160 mil €Value – 160 mil €

LOW-FLOOR TRAMCAR FLEET RENEWALLOW-FLOOR TRAMCAR FLEET RENEWAL

The tram fleet renewal programme for the City of Zagreb provides for the following projects:the purchase of 70 new multi-articulated, 100 per cent low-floor tram vehicles,the overhaul and modernisation of 50 single-articulated trams from the ČKD TATRA production programme (TMK 301),the reconstruction and modernisation of the Trešnjevka-Ljubljanica Tram Depot in Zagreb for the purposes of accommodating and servicing new vehicles,a new fare system,a transport control and management system.The goal of the above efforts would be to improve the functioning and to raise the quality of Zagreb’s urban transit system to the European level.The project company is ZET d.o.o. (Zagreb Electric Tramway, Ltd.). The total value of this investment has been estimated at € 160,000,000.00.

University Hospital ProjectUniversity Hospital ProjectValue – 265 mil €Value – 265 mil €

MUNICIPAL HOSPITAL

The construction of a new municipal hospital under the name of Zagreb University Hospital (SBZ) commenced in 1986 at the location in Novi Zagreb. However, construction works were discontinued in 1993, and in 1998 the Croatian Government passed a decision approving the Programme to Resume the Construction of the University Hospital complex.The gross developed area of the completed portion of the complex is approximately 120,000 m2. According to plans, this area should ensure the accommodation of approximately 1,000 hospital beds. According to a proposal which gained support from the Croatian Ministry of Health, the program to convert the Zagreb University Hospital complex would consist of three spatial and functional components:a health programme,a programme to move certain Croatian institutes operating within the health sector, anda commercial programme.The value of this investment has been estimated at € 265,000,000,00.

Sljeme/Medvednica Mountain ProjectSljeme/Medvednica Mountain ProjectValue – 9 mil €Value – 9 mil €

SLJEME/MEDVEDNICA MOUNTAIN PROJECTSLJEME/MEDVEDNICA MOUNTAIN PROJECT Plans to develop tourism and sports facilities within Medvednica Nature Park have been in the pipeline for a number of years now.The Tomislavov Dom Hotel has been completely restored: the works encompassed the renovation of the interior, the redesign of the façade, the additional construction of hotel facilities and the construction of an indoor swimming pool. The total value of the works was €2,800,000.00. The most important – and also the most expensive – component of this Project will be the modernisation of the existing Sljeme Cableway. The new cableway would follow the route of the existing one, which was constructed in 1963. However, the valley station would be shifted southward, next to the tram terminal at Dolje, which would make the cableway more accessible to citizens who use public transport for their trips to Sljeme.The total value of this investment has been estimated at € 9,000,000.00.

Underground Garages Underground Garages

Value – 25 mil €Value – 25 mil €

UNDERGROUND GARAGE

- TUŠKANAC- KLAIĆEVA- S. RADIĆ SQUARE

The project company is Zagrebparking d.o.o.

Restructuring of Institute for People with Special NeedsRestructuring of Institute for People with Special Needs

Value – 11 mil €Value – 11 mil €

RESTRUCTURING OF INSTITUTE FOR PEOPLE WITH RESTRUCTURING OF INSTITUTE FOR PEOPLE WITH SPECIAL NEEDSSPECIAL NEEDS

URIHO stands for the Institution for Rehabilitation of Disabled Persons through Occupational Rehabilitation and Employment. This Institution primarily employs disabled persons, who account for over 50% of its total workforce.According to plans, the rehabilitation of this company will also include the construction of new production facilities (i.e. four production floors), an office building, a sports hall and two outdoor sports grounds at Kajzerica in Novi Zagreb. The purpose of constructing the new plants is to consolidate the existing dislocated production.The remaining parcels of the undeveloped building land will be used for the construction of new business, trade, service and hospitality facilities. This land stands for one of the most attractive sites in the City, primarily due to its proximity to the Zagreb Trade Fair Complex.The total value of this investment has been estimated at € 11,000,000.00.

Conference Center ProjectConference Center ProjectValue – 32 mil €Value – 32 mil €

Commercial/Hotel/Residential ComplexCommercial/Hotel/Residential Complex Value – 70 mil €Value – 70 mil €

Lake Jarun Recreational Center ProjectLake Jarun Recreational Center ProjectValue – 3 mil €Value – 3 mil €

LAKE JARUN RECREATIONAL CENTER PROJECTLAKE JARUN RECREATIONAL CENTER PROJECT The Jarun Recreation and Sports Centre is the largest sports centre in the City. It is situated only 4 km from its centre and covers a total area of 240 ha, of which water areas account for 75 ha.Plans are being prepared for the reconstruction and improvement of this complex, including the construction and development of a campsite, a tennis centre with six tennis courts, new beach volleyball courts and a multipurpose playground, the improvement of the existing and the construction of new facilities and grounds, and the construction of a skating rink that will commence as early as this year. The plans also provide for further efforts to preserve the quality of wildlife in and around the lakes and to reconstruct both of the two existing filters for the purification of lake waters.The value of this investment has been estimated at € 3,000,000.00.

Sava River Cascades ProjectSava River Cascades ProjectValue – 750 mil €Value – 750 mil €

SAVA RIVER WATER-STAIRS PROJECT

The purpose of this project is to develop facilities that would enable power generation, stabilise the City’s water supply system, improve the utilisation of land in suburban areas for agricultural purposes, encourage housing construction and other efforts and provide defence against flood waters from the Sava River. The project provides for water management, utilisation and protection efforts in a wider area of Zagreb.

The completion of the Podsused Hydroelectric Power Plant would mark the first stage of this comprehensive project, creating conditions for the development of traffic infrastructure, the building materials and construction industry in general, as well as tourism, sports and leisure, hunting and angling, and the preservation of natural diversity.

The total value of this investment has been estimated at € 750,000,000.00.

Zagreb Sports and Recreation zone (Thermal Bath Complex) Value – 30 mil €Value – 30 mil €

ZAGREB SPORTS AND RECREATION ZONE

According to the Conceptual Programme and Urban Planning Design of the Zagreb Sports and Recreation Zone, as approved by the City of Zagreb Executive Council, the mentioned complex would consist of:an aquatic centre with indoor and outdoor swimming pools, accompanying bars and restaurants and recreational facilities, and an outdoor bathing area;a hotel with a conference centre;a sports centre including fitness and aerobics gyms and a multipurpose sports hall; andoutdoor sports grounds (for tennis, handball, volleyball, etc.) and cycling and jogging tracks.The location selected for the implementation of this project and the construction the Sports and Recreation Zone (Thermal Bath Complex) is a site west of the unfinished Zagreb University Hospital in Novi Zagreb, at cadastral plot no. 500 in the Blato cadastral municipality. The land covers an area of 27.8 ha and is owned and held by the City of Zagreb.The value of this investment is estimated at approximately € 30.000.000,00 €.

2. RESTRUCTURING AND PRIVATISATION OF 23 COMPANIES OWNED BY THE CITY

OF ZAGREB

Restructuring and privatisation phases:

• Preparation of companies for privatisation and restructuring

• Implementation of privatisation• Monitoring and oversight of privatisation

3. DEVELOPMENT INITIATIVE FOR CRAFT, TRADES AND SMALL AND MEDIUM-SIZE ENTERPRISES IN THE CITY OF ZAGREB

• In the interest of encouraging the establishment and launch of operations, as well as growth and development of sole trades and small and medium-sized enterprises, the following activities are being implemented:

• Granting loans to entrepreneurs and subsidies on interest to enterprise loans

• Providing assistance to traditional trades• Providing assistance to inventors and innovators• Cooperation with educational and research institutions• Encouraging the development of an enterprise infrastructure

(technology park, free enterprise zones, etc.)• “Jobs via ECDL (European Computer Driving Licence)” – IT

education and training of unemployed persons

4. CREDITWORTHINESS ENHANCEMENT PROGRAMME OF THE CITY OF ZAGREB

• Programme implementation will contribute to rationalisation and improvement of operations by the city’s administration

• The programme consists of nine developmental objectives or areas

• Objective 1.-Development of medium-term strategies for generating sufficient income to meet debt

repayments and to maintain services at the desired level

• Objective 2.-Improvement of the medium-term financial planning process

• Objective 3.-Improvement of the capital programming process

• Objective 4.-Improvement of the City’s budgeting techniques

• Objective 5.-Improvement of the level and promptness of collection of utility fees, contributions and rent revenues

• Objective 6.-Improvement of the process that will define achievable targets for efficiency savings in future budgets

• Objective 7.-Introduction of the role, activities and structure of a single treasury management unit within

the City Office for Finance• Objective 8.-Development of an internal audit function• Objective 9.-Introduction of a rolling programme of external

reviews of the economy, efficiency and effectiveness of the City’s operations

- Assembly of the City of ZagrebAssembly of the City of Zagreb- MayorMayor- City Executive CouncilCity Executive Council- 18 City administrative bodies18 City administrative bodies- 2233 City-owned companies City-owned companies- 300 City institutions300 City institutions

- - 17 neighborhood councils 17 neighborhood councils

STRUCTURE OF THE CITY OF ZAGREB

Republic of CroatiaRepublic of CroatiaCity of ZagrebCity of ZagrebCity Office for EconomyCity Office for EconomyTrg S. Radica 1Trg S. Radica 1tel:+385 1 610 1194, 610 1102 tel:+385 1 610 1194, 610 1102 fax:+385 1 610 1499, 610 1077fax:+385 1 610 1499, 610 1077e-mail: e-mail: gospodarstvo@zagreb.hrweb: http://www. zagreb.hrweb: http://www. zagreb.hr