ECONOMY

Slovenia, Croatia recapture former partners’ markets

ZAGREB – Slovenia and Croatia were the rich, industrialized poster states of Yugoslav socialism and the first to walk out on the federation in 1991. Now, after a decade of ethnic wars and economic decay, they are back to conquer the renascent markets of their former compatriots, hoping to outdo Western multinationals. «As a kid I loved Kinderlada (a Croatian chocolate spread),» said 27-year-old Tamara, a regular shopper at the Belgrade branch of the Slovenian supermarket chain Mercator. «I was happy to find it here, I will give it to my daughter. I do not distinguish between ‘their’ products and ‘ours,’» she said in the store in the Serbian capital. Yugoslavia’s disintegration released long-held frustrations and prejudices, but since 2000, moderate, reform-minded technocrats have taken power across much of the Balkan region and mistrust has given way to cooperation. Over the last three years, dozens of Slovenian and Croatian companies have bought into banks, food firms, retail and construction in Serbia and Bosnia. New deals on everything from refineries to publishing are negotiated every month. The business rationale is to return to markets where the two countries were dominant before 1990 rather than fight as newcomers in saturated and competitive European Union markets. Language, cultural awareness and brand nostalgia also help. Croatia’s Kras, formerly Yugoslavia’s leading confectioner, launched an aggressive sales campaign after the war. Now, around 75 percent of its foreign sales come from former federation members. Croatian economist Mladen Vedris says the expansion of Croatian business has been on an individual basis and sporadic, while Slovenian entrepreneurs have had a lot of support from the government and banks. As a result, they were first to take the plunge into Bosnia, Serbia-Montenegro and the Former Yugoslav Republic of Macedonia (FYROM). Purchasing power in these countries is still low, but they boast good growth rates and well-educated workers, desperate for jobs. «These are Slovenia’s traditional markets,» said France Krizanic, head of Ljubljana Law Faculty’s economic institute. «Our businessmen know them well, know how they are closed and lack transparency. These markets still have great confidence in Slovenian products.» Retailer Mercator spearheaded the Slovenian incursion by building its own network across the region. «Expansion into the markets of ex-Yugoslavia was necessary… Slovenia’s market just became too small,» said Mercator’s vice president, Mitja Marinsek. The firm – with several stores in Croatia, four malls in Bosnia and one hypermarket in Belgrade – aims to become one of the top three retailers in Croatia, Bosnia and Serbia. Slovenian newspapers say local firms have also set their sights on FYROM, the southernmost part of ex-Yugoslavia, planning to invest some 250 million euros ($301 million) setting up production facilities without EU-regulated customs. «Some companies invest (in Serbia and FYROM) because of lower production costs,» said Krizanic. He said some firms also found it beneficial to invest in these countries after Slovenia’s European Union entry (in 2004) changed trade and customs rules. Geography is also a factor, says Croatian cement and brick maker Nexe Grupa, which took over Serbia’s Jelen Do quarry and is now buying leading tile producer Toza Markovic. «The former Yugoslav markets are very important considering their closeness to us and to our export markets in Romania and Bulgaria,» Nexe, which also has a brick-making unit in the Bosnian capital Sarajevo, said in a written statement. «There are many firms from our sector in Serbia that have yet to be privatized,» it added. Economics is politics Despite the progress, politics and nationalism still affect business; the nationality of companies in any country is still a good indicator of how friendly bilateral relations really are. Croatia is one of the top two investors in Bosnia, where ethnic Croats make up some 15 percent of the population and ended up fighting on the same side as the majority Bosnian Muslims in the 1992-95 war. Croatia’s business drive in Serbia has been burdened by the legacy of its 1991-95 war against its rebel Croatian Serb minority and property rows between Croatian and Serbian firms. Some gripes date back to before the 1990s. In those days, Slovenian and Croatian manufacturers used the markets of Yugoslavia as a source of raw materials, processing them in Slovenia and Croatia and selling finished products to Western markets or back into a single Yugoslav market. This annoyed the poorer republics, who said they were being exploited, describing the process as «our products, their labels.» In a report this month from Serbia’s industrial hub city of Kragujevac, Belgrade daily Danas said years of poverty had changed the way many think about doing business with former republics. Slovenians are the biggest investors in the area. «Attitudes have changed because the ambitious plans unveiled by Slovenian firms herald jobs for at least part of the army of unemployed in Kragujevac,» Danas wrote. «It is also believed the Slovenians ‘who know us better than anyone else’ are a precursor to big and well-known European and global companies.»