Streamlined construction procedures to boost infrastructure imminent
Anka Mrak Taritaš, Croatia’s Minister of Construction and Physical Planning, outlines the legislative and practical advances taking place to boost the infrastructure in “a modern, open state that can guarantee stability in the region” that are being designed to simplify procedures as much as possible and ease market entrance for foreign investors. The Ministry-sponsored International Conference on Croatian Real Estate Market that will be held in Zagreb at the beginning of April 2013, and soon thereafter in London, will provide an ideal opportunity for closer cooperation between Croatian and British constructors and investors looking to take advantage of the more streamlined sector
To become an EU member, each state must meet the Copenhagen criteria through which it prepares itself for the adoption of European standards in various areas. Given the significant development of your country over the past two decades, in which aspects of this development could Croatia be set as an example for the region to follow?
There are many political, legal and economic criteria that we must meet. As the Minister of Construction and Physical Planning I can say that we have resolved the long-standing issue of illegal construction with our Act on Dealing with Illegally Constructed Buildings. This problem of illegal construction is not limited to Croatia, but it seems that with the new law passed by this Government in September 2012, we found an effective way to resolve it. The law is extremely liberal. It allows the legalisation of various types of buildings and construction in different areas, and the procedures for obtaining necessary permits have been simplified as much as possible. Basically, after we analysed the situation, we wanted to draw a line at one specific point and encourage citizens to solve the issue of illegal construction. Great interest and involvement of the public prove that we have succeeded in our intent, because I am convinced that the greatest benefit of the entire project is the fact that people finally realised they could not go on building and constructing as they pleased without permits and other relevant documents. More importantly, younger generations will be able to inherit properties with clean paperwork, whereby the value of these properties will most probably increase. Since we know that many countries in the region have a similar problem, I believe that our model could be a successful export product.
Your predecessor, Ivan Vrdoljak, recently said that Croats “would ultimately contribute to the EU and not just use the opportunities that it offers.” Can you expand on what was meant by that?
I can truly say that Croatia not only has great experts, but also huge potential in the young, capable and creative people who are just starting their professional careers. We have very successful small businesses that are thriving, and I am convinced that, as the market expands, they will successfully participate in the EU market. We have top scientists, some of whom already work in European countries, and upon EU accession they shall certainly be more sought after in the labour market.
More infrastructure projects are expected after Croatia’s accession to the EU, as the country will have access to funds with which such projects could be financed. What is your opinion on the future growth of this sector and could you please explain where the funds should be invested?
Good infrastructural networks are the precondition for the functional use of space. We have been continuously working on the development of these infrastructural networks, especially the road network. In the upcoming period, with the help of the EU Structural and Cohesion Funds, we aim to invest in other infrastructural networks: airports, railways, river transport, power plants (with the emphasis on renewable and environmentally friendly technologies), as well as power transmission systems. We shall also work on the development of new technologies and the availability of broadband ICT infrastructure in all parts of the country.
Considering the importance that the EU member states have for Croatia in terms of trade, EU membership should significantly increase investment and real estate development. The main efforts of your Ministry have been focused on the implementation of legal regulations in accordance with EU standards. You have mentioned that the main function of any ministry is to provide the legal framework for units of regional and local government to implement. Can you please tell us something more about the efforts of your Ministry in regard to legislation?
It is very important to differentiate between the legislation that is under the jurisdiction of the EU and the legislation under the jurisdiction of the member states. In this sense, EU standards have been implemented in almost all areas that are under the authority of this Ministry. In order to fully comply with specific EU regulations before Croatia’s accession, our Ministry shall issue four new legal acts, which shall replace the existing ones. One of them has been sent very recently to be deliberated by the Government in February, and the other three will be finalised by the end of Q1 this year. They will be notified before the accession.
We are aware of the problems with permit issuing at the local level as well as the implementation/interpretation of the law. In this sense the Ministry provides its official opinions and we make sure that these are very precise and do not leave room for doubts or multiple interpretations. We want to make the rules of the game very clear for both foreign and domestic investors.
As a ministry, our primary purpose is not to guide investors through their entire investment lifecycle – this is the role of state agencies such as the Agency for Investment and Market Competitiveness. However, our task is to organise the rules of the game and specify the procedures that any investor needs to go through in order to realise his investment, which is in any way related to construction. In that sense, we have quite a significant and responsible role in speeding up the process of undertaking investments in Croatia.
The Report on the Situation in Space 2008-2012 has just been deliberated by the Government. It is an official document containing the information on spatial planning and construction activities over the past four years. The report determined that less than 7% of Croatian territory has been allocated as construction land. That is enough given our population, and it means that there is room for property investments.
There are numerous procedures that a British company must comply with in order to invest in the construction and spatial planning sector in Croatia. What incentives and initiatives have been proposed and implemented by your Ministry to attract and enable easier business engagement of foreign investors in the Croatian market?
We are, in fact, in the middle of an extensive debate about the Act on Strategic Investments. It seems that part of the public misread some provisions of the Act which are still in public debate and I hope that, after the debate ends, it becomes clearer what the purpose of this legislation was, i.e. what the crucial goal was. It is under no circumstances a new sale of national wealth – which can be heard these days in the Croatian media. The point is to accelerate the procedures as much as possible and facilitate easier market entrance for foreign investors, but this does not mean at any cost or for any price. The idea of the act is to use a multidisciplinary approach to accelerate the arrival of foreign investors to Croatia, meaning that if a large international company is interested in doing business and investing in Croatia, we want to ensure all necessary and required procedures are conducted efficiently and promptly. Something that used to take months – going door-to-door and addressing numerous institutions, ministries, local government authorities etc. regarding the same issue – is supposed to be standardised through this particular piece of legislation, which would be some sort of a guideline, shedding light for the investors on the bureaucratic forest that exists at the horizontal level of governance in Croatia.
Moreover, when we talk about spatial plans, we must be aware of the fact that, as much as it is part of the democratic practice to give power of authority to the local government in various areas, in some cases, it often came to major setbacks in the realisation of investments due to the slowness or arbitrariness of local leaders. In some cases investors have been rejected because the evaluation of the local government was that they “did not need it.” We are currently working on a national spatial plan at the state level, which would need to be complied with when creating regional and municipal spatial plans.
Tourism as an industry has significant potential in your country and the arrival of low-budget airlines as well as the EU accession are expected to greatly contribute to the growth of tourism in Croatia. What is your opinion on the opportunities for foreign investors in the construction of tourism facilities and how are potential difficulties in project realisation going to be resolved, keeping in mind sustainable growth?
In a global context, what provides Croatian coastal areas specific character is the fact that it is one of the best preserved areas in the Mediterranean in terms of natural, cultural and traditional values, as well as the cleanliness of the sea and drinking water supplies. All this, together with intensified compliance with the EU and global market trends and standards, causes the growth in real estate brokerage activities in that area. The Croatian coastal area along the Adriatic is – and will be – the most interesting entrepreneurial and architectural space. In terms of economic benefit, it shall also be the most desirable area for EU investment in Croatia.
Because of the quality of natural resources and the level of environmental preservation, especially on the islands, but also in the continental parts of Croatia (spa, mountain areas, cities, as well as cultural and historical destinations), the chances of further development of Croatian tourism are high.
Most intense construction activity is expected in the areas closest to the coast. Specifically, today the EU laws allow all its citizens to freely acquire ownership of the property and choose a place of residence within the EU. Croatia has appropriate regulations and physical planning documents to ensure that all construction processes are properly prepared, directed and controlled, and that the natural and man-made values are preserved and protected. We are intensively working on the preparation of the new Spatial Planning Act, through which we aim to rationalise and accelerate the procedures for obtaining necessary permits by introducing the e-permit as a single document allowing construction.
I understand that there is a lot of land that was once owned by the Army, and now it is going to be released for foreign investment. What is your vision for the coast?
That is partially true. There are not as many buildings and facilities owned by the Army compared to the length of our coast. The coast of Montenegro had a lot of industrial plants for the Army, which is not the case in Croatia. There are Army-owned facilities in our coastal cities, and their purpose shall be redefined, but there are just two locations where brownfield investments could be possible – in Pula and the Island of Vis. A marina has been planned in Pula, and the procedure has already begun. A hotel and a marina have been planned on Vis.
Your Ministry is also implementing an energy efficiency strategy. Please give your view of this matter and its importance.
In accordance with the obligations of the Republic of Croatia under the Stabilisation and Association Agreement and the Energy Community Treaty, the Republic of Croatia is adjusting its energy-related legislation with the EU acquis communitaire referring to energy. This includes compliance with the so-called Third EU Energy Regulations Package.
Energy efficiency is a complex and multi-disciplinary area that is under the jurisdiction of several ministries (Ministry of Economy, Ministry of Environmental and Nature Protection, Ministry of Construction and Physical Planning), the Energy Efficiency Fund and the Centre for Monitoring Business Activities in the Energy Sector and Investments.
The Ministry of Construction and Physical Planning provides only a legal framework which secures more efficient implementation of the energy efficiency programme. It is an important subject for every modern state, but it is also our obligation. The energy efficiency programme in Croatia has been introduced through the retrofitting programme for public sector buildings, because they represent largest single consumers of energy and as such they are a significant source of gas emissions. For example, according to the data from 2010, energy consumption in buildings amounted to 42.3% of the total energy consumption in Croatia. Heating and hot water accounted for about 80-90% of total energy requirements in buildings, whereas lighting and other consumption such as for electronic equipment accounted for 10-20% of consumed energy. If we consider that buildings built before 1987 spend 200-250 kWh/m² on average for heating, it becomes clear that there is large irrational consumption.
You are currently part of a PhD study programme for spatial planning, urbanism and landscape architecture at the University of Zagreb. As an expert in the field of architecture, which challenges have you been faced with in your Ministry and what is your main strategy for solving them?
As an architect, I would like to raise the level of culture in Croatian construction sector by implementing such architectural policy that would improve, adjust and define clearer and better criteria, standards and regulations for the preparation of spatial plans, thereby ensuring the quality of spatial planning documentation, which is a prerequisite for quality construction and living environment. The relationship towards construction and architecture shows the culture of the people. Distinctive, high-quality architecture has the potential to boost development and progress of the entire country, as well as to present Croatia as a uniquely identifiable country at the international level.
I sincerely hope that the act on illegally constructed buildings and planned rehabilitation of urban areas where illegal construction seriously undermined pre-existing urban planning schemes will improve the infrastructure of under-equipped and/or unequipped settlements.
With regard to your political life, you were appointed as minister in November last year, after you spent almost a year as the deputy minister. Please tell us a few words about Croatia’s path, from its declaration of independence to this historic moment of the EU accession, and your role in this process.
Journalists often ask me how architecture and spatial planning are connected to politics, and then I love to mention a common saying that each architectural study, in terms of spatial plans and planning, is very much a political issue. In this sense, I have been involved in the political development of Croatia from its independence to the EU accession.
I shall not dispute the fact that Croatia has had its ups and downs in this process. You know very well that there was a war here which set many things back. It took quite some time before we could actually say that the rule of democracy had been established. However, today I can say with certainty that we have put many things in their right place – the fight against corruption and crime, minority status, and privatisation scandals.
Today we are a modern, open state that can guarantee stability in the region. We are confronted with a high unemployment rate, but it is also a reflection of the general recession trends, lack of investment and inert administration. Nevertheless, the government, of which I am a part, has been systematically working on these issues over the past year. We have not made unrealistic promises to our citizens, we do not use big words or catchy phrases, but you can be certain that we do not push things under the carpet and that we discuss each issue from multiple different angles and try to solve it as quickly as possible – as much as the circumstances allow us.
You are also one of four women in your Cabinet. Would you comment on the role of women in Croatian politics, with specific reference to their role in areas under the jurisdiction of your Ministry?
The Government has four female members; one of them is also the deputy prime minister. I am very proud of my party, the Croatian People’s Party – Liberal Democrats, because three out of our four ministerial posts have been appointed to women. Of course, I think that in general the proportion of female politicians in the total number of politicians should be higher.
From 2001 to 2011 the export of goods and services from the UK to Croatia increased by 110%, while imports from Croatia increased by 210%. From your perspective, what is the importance of the UK for economic development of Croatia and what is the best way for investors to find investment opportunities and business partners in Croatia?
The UK would be a very desirable partner for everyone, including, of course, Croatia. I would like to see the intensification of the existing cooperation. I am willing to acknowledge and accept any initiative that would bring our two countries closer together. In this sense, I can announce the International Conference on Croatian Real Estate Market, sponsored by the Ministry of Construction and Physical Planning, which will be held in Zagreb beginning April 2013, and soon thereafter in London. That is a great opportunity for fostering future closer cooperation!
Representatives from Croatia visited London to promote investment. Is this under your supervision? How are these towns being planned?
According to the Croatian Constitution, cities present local government units and as such they are partially self-dependent. Areas like spatial planning are under their direct jurisdiction. When they decide on a location, that is their decision. Here at the Ministry we plan key strategic projects, mostly linked to infrastructure and energy that the state defines as being of strategic importance.
The British have experience in investing in different nations in Europe. Spain has been a traditional investment destination for them, and it is a very similar market to Croatia. The British developed houses and holiday towns for the British to go on holiday. This could happen here in Croatia. How could the Ministry facilitate this investment, and where would you like the British to come in and invest?
We have a relatively small portion of state-owned land, and we can only plan projects for this land. The rest of the land is privately owned, so projects depend on the location and landowners. In that sense, we cannot do much, but we are trying to create a portfolio of potential locations or projects that we would like to see developed, which could then be presented to potential serious investors. When investors choose a location in a city, they have to look at the zoning plan of the city, which is under the jurisdiction of the city itself, i.e. its local government. All cities and regions are responsible for their own spatial planning, and then they report to us. We have a map of everything, but we do not make decisions in regards to zoning within specific units lower level governance.
What projects would you like to see developed?
The key area would be the energy sector. We need to comply with the Europe 2020 targets, which include the increase in the production of energy from renewable sources by 20%, and we are currently only at 5%. Wind turbines and solar energy would be very interesting. In terms of infrastructure, the country is quite well connected with highways, so railways could be a potential area. Some railway corridors have already been identified as strategically important. Tourism is another area. There are two state-owned pieces of land that are going to be used as tourism areas for further development – one is near Skradin and one near Dubrovnik.
Our tourism strategy is not focused on huge hotel resorts, but rather on smaller boutique, high-end hotels with high quality services and a focus on nature. However, we come back to the question of land ownership – the land is not state-owned, so the investment and its realisation depend on the land owner and the property developer.
We know that Acciona the Spanish developer of renewable, water and public infrastructure projects, started its first wind farm in Croatia as the country nears EU entry. What do you believe British infrastructure companies should know if they want to follow this lead?
Croatia has a number of respectable construction companies, which specialise in different segments of the construction sector: engineering, infrastructure, housing etc. It needs to be kept in mind that these larger companies have not grown so much because of their activities in Croatia, but rather their activities abroad. Certain companies have been working in Eastern Europe, Russia and countries like Syria, Iraq, Iran and Libya. That is how they built their companies up. However, we need to consider the current recession and the huge drop in construction activity over the past two to three years. Because of the recession and the fact that Croatia is a relatively small and closed market, with the population of only 4.2 million, we believe that all these companies – large, medium or small – would be interested in joining forces with foreign companies, which would also enable them to work outside of Croatia.
We need to mention companies in the energy sector, like Končar or Đuro Đaković, and others who could also be reliable potential investment partners.
What local expertise can Croatia offer to British companies that want to invest in renewable energies?
We have large companies with expertise in the energy sector, road construction and other infrastructural areas. Nevertheless, we want to further develop small and medium-sized enterprises in Croatia. Maybe the best way to get in contact with these small and medium-sized companies would be through the Croatian Chamber of Commerce or other professional chambers.
Investors are more than welcome to contact the Agency for Investments and Market Competitiveness, which is under the Ministry of Economy, to get the most updated and precise information on all procedures they need to go through in order to obtain a construction permit or any other permit, certificate, authorisation, etc.
As you know, we live in the globalisation era where communication between countries and governments opens doors for investments and economic growth. At this time, as Croatia is expecting its accession to the EU, how important is international communication and campaigns like ours that are trying to attract investment?
I think I partially answered this question in the previous paragraph. Communication in general, and specifically such as your campaign, is extremely important. We want to invite all foreign investors to come to Croatia, to encourage them not to be afraid of bureaucracy, corruption, or nepotism. This Government is a modern, European government, composed of top experts who do not fear Europe, but see it as a goal. Therefore, I invite you to visit us again and see to what extent our efforts have been successful.