Hot topics: NLB to buy Komercijalna banka in Serbia; Macron reconsiders block on EU enlargement; Milanović inaugurated as Croatia’s fifth presidentAdriatic Journal 26 February 2020
Author: Ana Potočnik
NLB to buy Komercijalna bankA in Serbia
Serbia has accepted the offer by Nova Ljubljanska banka to buy its Komercijalna banka. NLB offered EUR 387m for the purchase of 83.23% of Komercijalna banka, the figure has been officially confirmed by NLB. Purchase price will be payable in cash on completion. In accordance with Serbian bank privatisation regulations, NLB is not required to launch a mandatory tender offer for minorities’ share in KB. Komercijalna banka posted a profit of more than EUR 70m last year and all indicators point to potential for growth, the media reports. Today, it has more than 200 branches in Serbia, with another nine in Kosovo, and two banks in Montenegro and Bosnia and Herzegovina. Komercijalna bank’s market share in Serbia is 11%. Negotiations with the International Monetary Fund and the World Bank on its privatization have been ongoing since 2006.
According to the Serbian media, NLB gave the best binding offer out of three interested buyers.
“The acquisition of Komercijalna Banka represents another very important milestone in NLB’s development following the successful conclusion of NLB’s own privatisation process in 2019. As the largest of our core foreign markets, strengthening our presence in Serbia in a controlled and value accretive manner has been a key strategic priority for the group. As a result of the transaction, NLB’s market share in Serbia will increase to over 12.1% by total assets, making NLB the third largest banking group in the country with a very unique position of one of leading banks in all markets of Group’s presence", stated Blaž Brodnjak, CEO of NLB.
"Seeing this changing world order, the question of Europe's role in it logically arises, as it is so for the Western Balkans. It is well known the Western Balkans, due to its business currents, arrangements and interconnections, is very dependent on the economic situation in global markets," Blaž Brodnjak, CEO of Nova Ljubljanska banka argues.
There is only one principal legitimate interest of the Western Balkans, Brodnjak is convinced, and that is...
Read the interview with Blaž Brodnjak to find out more about his take on the future of the WB region and its challenges ahead.
Macron reconsiders block on EU enlargement
French President Emmanuel Macron said last month he would support the opening of EU accession negotiations with North Macedonia and Albania if the European Commission gave them a positive progress report in March. Last October France blocked the opening of the negotiations with the two Balkan countries, demanding the negotiations methodology be changed first and that Skopje and Tirana do more in combating corruption. North Macedonia has been a EU candidate since 2005. In order to remove Greece’s blockade, it changed its name from Macedonia to North Macedonia. Most member states and leaders of European institutions called the blockade of North Macedonia and Albania a historic mistake. Earlier this month, the European Commission proposed a stricter and reversible accession negotiations methodology, to meet France’s conditions for opening entry talks with North Macedonia and Albania.
"We are waiting for the report in March... depending on that, if the results are positive and confidence is established, then we should be in a position to open the negotiations"
- Emmanuel Macron AT Munich Security Conference
Croatia Airlines introduces new regional flights
Last month, Croatia Airlines introduced new international flights from Zagreb to Sofia and Podgorica. Scheduled international flights from Zagreb to Sofia will start on 1 May and will operate three times a week until the end of October. International flights from Zagreb to Podgorica will start on 3 May and will also operate three times a week.
"This way we are expanding the network of our destinations to 40 in the 26 countries where we are present as an airline,"
- the airline’s CEO Jasmin Bajić
CEFTA to ease the trade on fruit and vegetables in the region
At the meeting last month of the CEFTA joint committee, a decision was adopted to ease the trade on fruit and vegetables in the Central European Free Trade Area. The decision includes simplifying controls on exports and reducing formalities at the borders which will also cut costs. Companies will therefore be able to transport products faster to end customers, crucial for perishable products such as fruits and vegetables. It has also been agreed that the mutual recognition of certificates for the export of fruits and vegetables will be issued by each of the economies of the CEFTA region. The decision is based entirely on new EU legislation and promotes further integration of the region into the EU.
Croatia needs to accelerate economic convergence with EU
Convergence of Croatia’s economy with the EU needs to accelerate, the country’s hard-won fiscal gains are fragile and should be carefully preserved, the International Monetary Fund (IMF) said in its latest report on Croatia. The IMF issued a comprehensive country report on Croatia last month, saying that although Croatia’s economy continues to perform well, its convergence with that of the rest of the EU needs to accelerate and that the country’s hard-won fiscal gains are fragile and should be carefully preserved. The report also notes that Croatia had experienced its fifth consecutive year of solid economic growth, once again driven largely by private spending and tourism. “Croatian economy has become stronger over the last five years. This is significantly because of strong budget management and skillful policies by the central bank. As a result, public debt has fallen along with interest rates, creating room for a robust consumption-led private sector expansion,” the IMF said in a press release. Croatia’s economic growth is expected to slow down in the coming years, with levels of both public and external debt likely to continue falling.
"The pace of fiscal consolidation in 2019 continued to slow, with the budget estimated to be close to balance. Recently agreed wage increases in the public sector are expected to increase current spending in 2020. Even though revenues will remain buoyed by economic activity, the budget balance is expected to turn into a small deficit in 2020, in part due to additional tax cuts," the IMF said in a press release
The IMF warned of large-scale emigration and stagnation in terms of catching up with EU average income per capita levels. “Yet, Croatia has barely reduced its distance with the EU average in terms of income per capita in the last decade, and emigration of the young continues to pose challenges,” the IMF said. The IMF also said they support the decision to postpone an announced cut of the 25% VAT rate – among the highest in Europe – as fiscal performance has recently become burdened by a number of spending demands.
Prince Charles to visit Bosnia
The British embassy in Bosnia and Herzegovina confirmed last month that the Prince of Wales will visit the country on March 17 and 18 to mark the 25th anniversary of the Srebrenica genocide. “His Royal Highness will undertake engagements in Sarajevo and Srebrenica. A key element will be a visit to the memorial at Srebrenica to mark the 25th anniversary of the genocide. His Royal Highness will pay his respects to the victims, accompanied by a number of survivors, including mothers who are still looking for their missing family members,” the Embassy said. Prince Charles previously met families of the missing from Bosnia and across the region at Clarence House in 2017 and again in 2018. “The visit of The Prince of Wales to Bosnia and Herzegovina demonstrates the UK’s increased commitment to Bosnia and the Western Balkans region, its support for reforms to improve citizens’ lives and create a brighter future; as well as His Royal Highness’s own long-standing commitment to post-conflict reconciliation in the Western Balkans,” the Embassy noted. Prince Charles last visited BiH in 2007.
US to provide US 1bn for Three Seas Initiative
The United States will ensure US 1 billion for the Three Seas Initiative, Secretary of State Mike Pompeo said last month at the Munich Security conference. “Through our International Development Finance Corporation, and with the support of the US Congress, (the US) intends to provide up to $1 billion in financing to the Central and Eastern European countries of the Three Seas Initiative,” Pompeo said. The Three Seas Initiative is an informal political platform of EU member states and Central and Eastern European countries on the Adriatic-Baltic-Black Sea stretch. The now former president of Croatia, Kolinda Grabar Kitarović, together with Polish President Andrzej Duda, promoted the initiative to achieve stronger connectivity within the region in energy, the transport infrastructure and digital communications and to reduce the gap between Central and Eastern Europe.
"Our aim is to protect democracies through strong private and public sectors" - Mike Pompeo
Offer for Bosnia's Aluminij factory rejected
possible lease of the Mostar-based Aluminij aluminium smelter, the government of the Croat-Muslim Federation in Bosnia and Herzegovina urged the group to propose a new model for cooperation. The consortium, comprising MT Abraham Group, China Engineering Corporation and China Industrial of Engineering and Construction Co. Ltd, demanded subsidised electricity prices and other advantages. The government said this was the reason it rejected the offer. Aluminij’s biggest stakeholders are the Federation entity government and small shareholders, each holding a 44% stake, while Croatia’s government holds 12%.
Agreement signed to restore Belgrade-Prishtina flights
Officials from Serbia and Kosovo signed an agreement in January that will allow the resumption of Belgrade-Prishtina flights after more than 20 years. A letter of intent was signed in the US Embassy in Berlin in the presence of the US ambassador Richard Grenell and US National Security Advisor Robert O’Brien. Eset Berisha, CEO of the Kosovo Civil Aviation Authority said the letter of intent “puts the two civil aviation authorities into contact as equal partners”, adding that this is the first step to full normalization of Kosovo’s airspace. Lufthansa’s Eurowings company will fly between Belgrade and Pristina once Serbia and Kosovo remove all obstacles. Head of Serbia’s Government Office for Kosovo Marko Djurić told Serbian state TV that flights between the Serbian capital and Prishtina could resume once the 100% tariffs on Serbian goods imposed by the Kosovo authorities are revoked and the Belgrade-Prishtina dialogue continues. He cited that currently there are 12 buses a day that link Belgrade and Prishtina.
Milanović inaugurated as Croatia's fifth president
Zoran Milanović was sworn in as the fifth president of Croatia last month, at a low-key ceremony in the President’s Office in Zagreb’s Pantovčak neighbourhood, breaking with the tradition of holding a public ceremony in the Saint Mark’s square. Only 43 guests, including state officials, the president’s family, and his campaign team, attended the ceremony. This is the first time that party leaders, diplomats, and church dignitaries did not attend a presidential inauguration. Outgoing president Kolinda Grabar-Kitarović and former presidents Stjepan Mesić and Ivo Josipović were in attendance, as well as the parliament speaker Gordan Jandroković and deputy speakers, prime minister Andrej Plenković and three of his deputies, constitutional court president Miroslav Separović, and the armed forces chief of staff General Mirko Sundov. Milanović was elected president in a runoff election on January 5, beating the incumbent conservative Grabar-Kitarović with 52.7% to 47.3% of votes. Milanović was the prime minister from 2011 to January 2016 as the Social Democratic Party (SDP) leader. He took the helm of the SDP in 2007 and stepped down in 2016 after the party lost the 2015 parliamentary election.
BiH exports drop in 2019
Bosnia and Herzegovina’s total trade volume in 2019 stood at EUR 16.2 billion, including exports which amounted EUR 6 billion and imports worth EUR 10.2 billion, the country’s Foreign Trade Chamber announced last month. The figures show there was a 3% year-on-year drop in exports, and a 1.5% increase in imports. The total import-export deficit in 2019 amounted to EUR 4.2 billion, up by more than 9% or by EUR 344m from 2018. The rise in the value of imports, which increased by around EUR 143m, was attributed to increased local spending and also the volatile prices of oil and oil-based fuels. In terms of trade partners, the chamber said that Bosnia achieved a good export-import trade with Germany and Italy, and a positive trade balance with Austria. Trade with the EU accounted for 72.1% of BiH’s exports and 68% of its imports. Exports to EU markets were worth EUR 4.3 billion, while imports from the EU amounted to EUR 6.9 billion. Bosnia’s largest trade partner in the EU in 2019 was its neighbour Croatia, with the total volume of trade totaling EUR 2.5 billion. BiH’s export-import coverage with Croatia fell to 41%, down by 4% from 2018. After the EU, CEFTA is Bosnia’s second most important trading bloc, accounting for 17.4% of Bosnia’s exports and 15.4% of its imports. Its most important foreign trade partner from the CEFTA region in 2019 was Serbia.
Belgrade and Prishtina sign ‘statement of intent’ on transport links
In Munich last month, the representatives of Belgrade and Prishtina signed a ‘statement of intent’ on restoring the railway transport and building a motorway linking two capitals in Munich last month, according to Serbia’s Beta news agency. “President Vučić witnessed today in Munich the signing of the statement of intent to re-establish the railway corridor Belgrade – Pristina and the statement of intent to construct the Belgrade-Pristina motorway,” the Serbian president’s Instagram post said, Beta reported. Other officials present at the signing included Kosovo’s president, Hashim Thaci, US special envoy for Belgrade-Prishtina dialogue and US ambassador to Germany, Richard Grenell, and the US ambassador to Serbia, Antony Godfrey.