Country report CROATIAManagement of the SoE’s and Distribution of Funds

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Legislative framework for management of SoE’s 2011: Republic of Croatia has finished negotiations and fulfilled EU benchmarks criteria on the

management of the SOE’s There is no special or separate Law that regulates work and management of the SoE’s. The work and management is regulated by general company legislation and variety of the Governmental

decisions: Law on Companies (OG 111/93, 34/99, 52/00, 118/03, 107/07, 146/08, 137/09, 152/11, 111/12) State Property Management Law (OG 145/10, 70/12)

1. Decision on the Adoption of the Code of Corporate Governance of Companies in which the Republic of Croatia has Shares or Interests (OG 112/2010), 2. Decision on Practice of Supervisory Board Members and Members of the Assembly in Respect to Payment of a Part of Company’s Profit in the Croatian State Budget in which the Republic of Croatia has Shares or Interests (OG 40/2011), 3. Decision on the Determination of the Requirements for Candidates for Members of Supervisory or Administrative Boards and Management of the Companies in which the Republic of Croatia has Shares or Interests (OG 19/2012),4. Regulation on the Implementation of Public Tenders and the Conditions for Members of Supervisory or Administrative Boards in Companies in which the Republic of Croatia has Shares or Interests (OG 95/2010).Important notice, for governmental decizions there is no need for parliamentary votes and they can be changed at any time depending of the need of government. Enterprises owned by municipalities are not covered by legislation.

Institutional framework

Reliability of data:

According to the Government Decision on the List of Legal Persons of Special State Interest (OG 144/2010) the number of the SoEs in Croatia is 63.

According to the Ministry of Justice report, number of SoEs is 86, which still does not include all of them.

Institutional framework

State agencies established for management of the SoE’s:

Agency for Management of State Property (AUDIO) since January 1. 2011: 1. Strategy of the State Property Management 2. Management Plan 3. Report on the Implementation of the Management Plan. 4. State Property Register Non of these documents and instruments are in place at the time of writing this report (November 2012).

State Office for Management of State Property since March 2011:Completely overalps with the AUDIO. Not even employees of those two agencies could not explain the difference in work between the two.

Political influence over SoE’s 2000 (left coalition gained power) 2002 Fall of Coalition and continuation of Ivica Račan mandate 2003/4 Ivo Sanader gained the power (Conservative coalition) 2007/8 Ivo Sanader changed the government after elections 2009 Ivo Sanader resigned, Jadranka Kosor took over (still conservative coalition) 2011/2012 Left coalition took over the government

Distribution of funds and political influence

Croatia: Population: 4.290.612 127 Cities and 429 municipalities GDP: Approx. 44.527.460 EUR Sources of data for research: Ministry of Finance, Central

Bureau of Statistics, Cities and Municipalities based on the FIOA, PSD previous researches

FOIA responses: 127 Cities, November 2012

Total

FOIA responses: 429 municipalities, November 2012

Total

Share of the state aid in revenues(all cities 127 and municipalities 429)

Low Share High Share AverageCities 0,48%

Zagreb53,36% Novigrad ZD

16,22%

Municipalities 0,13%Medulin (Istria)

87,64%Civljane (Šibenik)

26,27%

Cities – correlation between the national/local government change with the distribution of funds (only the cities that responded to FOIA – November 2012)

Municipalities – correlation between the national/local government change with the distribution of funds (only the municipalities that responded to FOIA - November 2012)

60%(214 cases)

40%(145 cases)

Municipalities of Republic of Croatia(sample: 162 municipalities)

Cases where increase/ decrease of funds correlates with political changeCases where increase/ decrease of funds does not correlates with political change

BACCI research – Croatia 4 ministries, based on the highest value contracts and highest frequency contracts, potential conflict of interest according to media articles

BACCI research – Croatia 5 cities, based on the highest value contracts and highest frequency contracts, potential conflict of interest according to media articles

Conclusion SoE’s

Regulatory framework for SoEs is insufficient, weak and fragmented in variety of unsynchronized acts that overlap

Institutional setup overlaps and none of the instruments foreseen in the regulatory framework (e.g., registers of the SoEs, strategies, management plans etc.,) are not in place

Management of the SoEs is highly exposed to partisan interests without any sense in terms of the protection of the public interest or company interest

Comprehensive data on SoEs that suppose to be collected by the relevant agencies are do not exist and data vary from agency to agency

There is no any specific regulation of the local public enterprises or any comprehensive data collected on such entities

Conclusion Distribution of Funds (state aid) In over 60% of cases distribution of funds can be correlated to change of the political

leadership at municipal or national level. The distribution of funds like other aspects of the financial management and decision-

making is highly affected by political and sometimes personal interests of the political leaders.

The best example is former Minister of the Roads Božidar Kalmeta an absolute champion in distribution of state aid, that managed to attract over 38.616.320.88 EUR of the state aid for his city Zadar (his electoral area where he was the mayor prior to his appointment for Minister of Roads) the level of aid clearly corresponds with his personal relationship with the current prime ministers (Sanader and Kosor):

Thank you for your attention! Questions