Economic analyst Damir Novotny appeared on N1 television's morning programme Novi Dan to comment on the problems at the Pula-based shipyard Uljanik, and the depositions given to police investigators by former Economy Minister Martina Dalic about the process of dealing with the Agrokor crisis, recently published by N1.
Today is the third day of strike at the Uljanik shipyard. The strike will continue until the demands for July salaries to be paid to workers are met. Speaking of the shipbuilding sector overall, from 1992 to 2015 the government spent some 30 billion kuna (€4 billion) on it, and it still has many problems.
“Shipbuilding used to be a huge business once, very modern, in the 1980s it was a very strong sector in Croatia. However, the 1980s are long gone. Shipbuilding across Europe has transformed, it happened with Polish, Italian, French shipyards. They all transformed their business into something different, and building large, simple ships like oil tankers has moved to Asian countries because they are close to sources of steel and cheap labour. Croatia has neither of those.
The largest ship that Uljanik produced recently had a capacity of 20,000 tonnes, today there is no more demand for ships like that in Europe. Uljanik, as all our shipyards, are used to building that sort of ships, where the value was mostly created by hard manual work. Today the value of a ship is not in the hard manual labour invested in it. We saw emotional workers on strike, these emotions reflect how hard their manual labour is. But unfortunately, that labour just cannot bring enough value to cover for all of their salaries.
Uljanik has no capital. The company spent its capital a long time ago, it just lived off state subsidies. Today it is inconceivable that a company like Uljanik has no capital, that’s simply not sustainable. They never transformed into a modern shipyard like others around Europe. The emotions of workers now surfaced, but the news is bad for them unfortunately. It’s impossible to survive on the market like this, huge changes are necessary. Another thing that needs to be said is that the workers are also shareholders, they are also responsible for the drop in the company’s value. They paid out salaries. Salaries were being paid out without them being earned.”
The situation is very uncertain. The government cannot continue investing money, we are waiting for the decision of the European Commission on the approval of state aid. The strategic partner already gave some money, and he said he would not commit any further. Is it all down to Brussels now?
“The issue is not Brussels, which is not important at all. It’s a matter of survival, we are talking about some 4,000 jobs which were kept in existence by artificial means. A huge part of those jobs cannot survive in the global market. All the past governments pumped tax payers’ money into the shipbuilding industry. Do you think you or me should subsidise jobs that cannot survive, just because the government is being pressured? It’s not a matter of Brussels, it’s a matter of common sense. Some 30 billion kuna were thrown at the problem over the years, and nothing came out of it.”
We also have the issue of state guarantees which could be activated, directly affecting the state budget. What’s the worst that could happen?
“Not all of those guarantees would be activated at once. If we talk about the responsibility of the company management – it certainly carries a share of it, but it wasn’t just them. All managements before them are also responsible, as well as shareholders, including the workers themselves who could have dismissed previous managements for not doing a good job. All managements signed contracts for ships below their realistic price, and created losses which are now enormous, we are talking several hundred millions of euros that somebody is supposed to invest now.
Nobody wants to take up such a burden, so the least bad solution is now sought after. There are some ways for them to go forward, not in building ships, but maybe in making other kinds of metalworking products. Many shipyards around Europe transformed that way, today they build wind power plants, or oil rigs – not ships. Restructuring of the company is the necessary and only solution. Work that will bring profit in the future must be found. The solution is in cutting costs, including jobs, at the company.”
It’s been two months since the state prosecutor dismissed charges related to the so-called Hotmail Affair. On Wednesday N1 television exclusively published the deposition former Economy Minister Martina Dalic and two other people had given to investigators for the anti-corruption police Uskok. It turns out Prime Minister Andrej Plenkovic was involved in their communication all along. The ruling officials keep saying it was all done in a transparent manner, that they did everything to save Croatia’s economy.
“That can be compared to Donald Trump’s situation with porn actresses. The first issue is whether he paid them, and the second whether he used money he shouldn’t have. What’s contentious to me is the way economic policy is run. The government doesn’t have a serious team of economic advisors, it is doing a very bad job at macroeconomic management. Unfortunately, this is not something unique to this cabinet, we had the same thing with previous governments. This sort of management just makes us go from one (emergency) case to another. We had Agrokor, then it’s Uljanik, tomorrow it will be some other company. The institutions, unfortunately, haven’t been active enough in this case.”
There’s also the matter of the intelligence service SOA. According to her deposition, Martina Dalic asked the head of SOA to perform background checks for some of the people selected to take part in the experts’ working group to deal with Agrokor.
“That’s an unusual situation. We must create conditions for companies to manage their business on their own, and that includes them paying for their mistakes. It’s not the government’s business, or any government agency’s business – unless national interests that these agencies are tasked with protecting are involved. Agrokor is a large company, but not quite that big for the economy to be damaged (by its bankruptcy). Croatian economy is hurt more by government’s bad decisions.
Agrokor will eventually survive, in some shape or form, and that will be determined by the market. If the market doesn’t recognise products made by a certain company, no government can save that company. All these are companies that the government thought intervention was needed, and those interventions would always end in non-transparency and confusion, with the end result in doubt.”
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