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Privatization in Croatia refers to political and economic reforms which resulted in the privatization of state-owned assets in Croatia, immediately after the breakup of Yugoslavia. Most privatization took place in the 1990s, during the presidency of Franjo Tuđman and the rule of his party Croatian Democratic Union (HDZ). Many aspects of the privatization process are still seen as controversial as the political and economic turmoil, coupled with the events of the simultaneous 1991–95 independence war, are thought to have led to a degree of criminal activity, which plunged the country into an economic depression.

Early privatization

The privatization process in former Yugoslavia initiated under the government of Prime Minister Ante Marković. In 1990 he introduced a privatization programme, the new federal laws on privatization permitted enterprise management boards to initiate privatization, mainly through internal shares, initially not tradable on the stock exchange. The laws put an emphasis on "insider" privatization to workers and managers, where shares could be offered to workers at a discount. The Yugoslav authorities used the term property transformation when referring to the process of changing social ownership into private ownership.

Separate privatization laws in individual republics soon replaced the federal law. In April 1991 SR Croatia replaced the federal law on privatization with its own privatization law. The new law stipulated compulsory privatization and the elimination of social ownership, while socially owned enterprises were to be transformed to joint-stock or limited liability companies. These new laws in Croatia and Slovenia were interpreted as tacit nationalization, a tendency of both governments to first renationalize social property in order to proceed with privatization later.

At the time Croatia gained independence, its economy (and the whole Yugoslavian economy) was in the middle of recession. As a result of the war that started in 1991, infrastructure sustained massive damage, especially the revenue-rich tourism industry. Privatization and transformation from a planned economy to a market economy was thus slow and unsteady.

Main events

Under the government of the Croatian Democratic Union (HDZ), Croatia initiated its privatization programme in 1992 when companies began arranging sales of shares to their employees. Privatization revenues and 2/3 of unsold shares were transferred to the Development Fund, while the remainder of unsold shares was transferred to the Pension Fund and the Disability Insurance Fund, both controlled by the state. Privatization often involved the installation of new managers sympathetic to HDZ, or even their leading members, which discouraged the arrival of foreign investors. The state also took full ownership of over 100 important large companies and installed new managers there, who were also often members of the ruling party.

With the end of the war, Croatia's economy recovered moderately, but corruption, cronyism, and a general lack of transparency stymied economic reforms and foreign investment, accompanied by public distrust when many state-owned companies were sold to politically well-connected at below-market prices, all of which were common to reforms that took place in most post-communist transition economies.

Primary methods of privatization in Croatia were management employee buyouts, while secondary methods were vouchers. In 1991 private sector share in GDP was 25% and in employment 22%. The method of privatization contributed to the increase of state ownership because the unsold shares were transferred to state funds. In 1999 the private sector share in GDP reached 60%, which was significantly lower than in other former socialist countries. The government retained 1-30% shareholdings in privatised firms in 33,4% of firms, and above 30% in 7,6% firms, much higher than other countries.

In 1995 a Ministry of Privatization was established with Ivan Penić as its first minister. The privatization programme was criticised by Croatian economists who characterized it as crony capitalism. The ruling party was particularly criticised for transfering enterprises to a group of privileged owners connected to the party. Croatian president Franjo Tuđman was also a target of critics and allegations of nepotism and the likelihood that he personally profited. An alleged statement about 200 wealthy families that would manage Croatian economy is at times atributed to him, although others note that there is no evidence that Tuđman ever said that. There were accusations that the daughter of Franjo Tuđman, Nevenka Tuđman, participated in an illegal mediation in 1996. In 2002 charges were raised against her, but in 2007 she was freed of charges that she used her social position, arranged business and received commission for it. In the second half of the 1990s (Franjo Tuđman's second tenure), his grandchild, Dejan Košutić, became the owner of Kaptol Bank and emigrated from Croatia to Serbia after his grandfather's death. He returned only in 2005 to launch the information security consulting company Kvadra Savjetovanje.

The privatization of large government-owned companies was practically halted during the war and in the years immediately following the conclusion of peace. As of 2000, roughly 70% of Croatia's major companies were still state-owned, including water, electricity, oil, transportation, telecommunications, and tourism.

See also

• Franjo Tuđman
• History of Croatia
• Croatian War of Independence
• Economy of Croatia
• Miroslav Kutle

References

1. ^ Patrick Heenan, Monique Lamontagne: Central and Eastern Europe Handbook, Routledge, 2014, p. 96
2. Milica Uvalic: Investment and Property Rights in Yugoslavia: The Long Transition to a Market Economy, Cambridge University Press, 2009, p. 185
3. ^ William Bartlett: Europe's Troubled Region: Economic Development, Institutional Reform, and Social Welfare in the Western Balkans, Routledge, 2007, p. 65
4. Milica Uvalic: Investment and Property Rights in Yugoslavia: The Long Transition to a Market Economy, Cambridge University Press, 2009, p. 190
5. International Business Publications: Croatia Investment and Trade Laws and Regulations Handbook, p. 22
6. ^ Patrick Heenan, Monique Lamontagne: Central and Eastern Europe Handbook, Routledge, 2014, p. 110
7. William Bartlett: Europe's Troubled Region: Economic Development, Institutional Reform, and Social Welfare in the Western Balkans, Routledge, 2007, p. 18
8. International Business Publications: Croatia Investment and Trade Laws and Regulations Handbook, p. 22
9. Istvan Benczes:Deficit and Debt in Transition: The Political Economy of Public Finances in Central and Eastern Europe, Central European University Press, 2014, p. 203
10. Saul Estrin: The Impact of Privatization in Transition Economies, London School of Economics and Political Science, 2007, p. 14-15
11. Saul Estrin: The Impact of Privatization in Transition Economies, London School of Economics and Political Science, 2007, p. 18-19
12. Istvan Benczes:Deficit and Debt in Transition: The Political Economy of Public Finances in Central and Eastern Europe, Central European University Press, 2014, p. 205-206
13. Saul Estrin: The Impact of Privatization in Transition Economies, London School of Economics and Political Science, 2007, p. 20
14. William Bartlett: Europe's Troubled Region: Economic Development, Institutional Reform, and Social Welfare in the Western Balkans, Routledge, 2007, p. 66
15. http://pollitika.com/o-privatizaciji-pretvorbi
16. Roman Domović: Autentičnost sintagme „200 obitelji“
17. "Charges Raised Against Nevenka Tudman". HRT. 13 October 2002. Retrieved 26 September 2007.
18. Zeković, Martina (8 February 2007). "Nevenka Tuđman oslobođena optužbi". Nacional (in Croatian). Archived from the original on 9 July 2012. Retrieved 15 June 2011. {{cite news}}: Unknown parameter |deadurl= ignored (|url-status= suggested) (help); Unknown parameter |trans_title= ignored (|trans-title= suggested) (help)
19. http://www.index.hr/vijesti/clanak/tudjmanov-unuk-bit-ce-nagradjen-sa-120000-kuna-jer-je-upropastio-banku/292482.aspx
20. Eastern Europe: An Introduction to the People, Land, and Culture, p. 473

Further reading

• Stupanj i učinci privatizacije u Hrvatskoj Template:Hr icon

• 20th century in Croatia
• Privatization in Croatia
• Economy of Croatia
• Political controversies in Europe