Croatia Vows to Stop Parties Running State Firms

The two main parties in Croatia’s new government have pledged to select the managers of state companies through public tenders in future – but not everyone is persuaded.

Experts have given a cautious response to claims that managers of Croatian state companies will in future be selected through public tenders – not as a result of political ties. This is promised outcome of an agreement between two biggest parties in the new centre-right government, the Croatian Democratic Union, HDZ, and the Bridge of the Independent Lists, MOST – which has argued strongly for the change.

Berto Salaj, professor at the Faculty of Political Sciences in Zagreb said that he doubted “everything will go according to MOST’s plans”, or that managers would in fact be chosen only through a transparent process. “Even if they do go through public tenders, this in no way means that political appointments will be avoided,” he warned. “We have experience with HDZ governments in the past and we know that politically suitable people are named to such posts, so we shall see if MOST can overturn that trend,” he said. The selection of managers in state and public companies through public tenders was a key point in MOST’s general election campaign.

However, the HDZ appeared to oppose the idea until Wednesday, supporting the existing model of government directly naming the management. The HDZ argued that laws have to be altered to introduce the new model. “We are for the professionalization of management and we have always advocated this [the tender system],” the vice prime minister and president of MOST, Bozo Petrov, said on Monday.

Tomislav Karamarko, vice prime minister and HDZ president confirmed on Wednesday evening that management in state companies will now be named via public tenders. But Salaj warned that “party clientelism” was deeply rooted in Croatia, and state companies were widely seen as valuable “party nests”. Croatia’s finance agency says over 1,400 state companies exist in Croatia, making up 1.5 per cent of all companies registered in the country.

These companies registered 22.3 billion euro in total revenue in 2015, equal to 30 per cent of the total revenue made by the private sector. In terms of revenue, out of top ten companies in 2015, three are state owned, the Croatian Electricity Company, HEP, and its two daughter companies, HEP, Operator of the Distribution System and HEP – Production.

Top of the list is the energy company INA in which the state owns some 47 per cent of the shares. INA is undergoing an international arbitration process with the Hungarian energy company MOL over management rights to the company. Aside from revenue, state companies have massive assets in property, worth around 45.5 billion euro, or 41 per cent of all property owned by business subjects.
There is a longstanding tradition of parties in government weilding influence in state companies. In the last centre-left government, the management of the energy company Plinacro came from the Croatian People’s Party, HNS, for example. During two centre-right governments between 2003 and 2009, the HDZ had control over HEP, while its coalition partners, the Croatian Peasants’ Party, HSS, and the Croatian Social Liberal Party, HSLS, had control over the food company Podravka and the insurance company Croatia Osiguranje respectively.
The EU urged the Croatian government in January 2015 to start naming the management of public companies through public tenders.
5 February 2016