Croatia - Shipbuilding
|ULJANIK SHIPYARD||[commercial only]|
|3. MAJ SHIPYARD||[commercial only]|
Petar Kresimir IV|
|Croatian Shipbuilding Corp.|
Though heavily dependent upon export orders, and particularly upon sales that net it hard exchange currency, the Yugoslavian shipbuilding industry managed during the Cold War to retain a relatively high level of capacity utilization. Five shipyards together account for 95 percent of total industry capacity. Three of these yards--Uljanik in Pula, Third of May in Rijeka, and Split in Split-are by far the largest. Yugoslavian yards ranked ninth in the world with 797,000 d.w.t. of shipping on order in 1984. Yugoslavian yards delivered just over 210,000 grt in 1983, slightly less than the 252,000 grt delivered in 1982. The industry reportedly employed approximately 23,000 workers in 1983, up. from approximately 20,000 in 1980, although many of these employees may not have been actively engaged in shipbuilding activities. Net wages in the industry average approximately 32,000 dinars, or $170 a month.
By the early 1980s Yugoslav yards sold more than 90 percent of their total output abroad. Although some of these sales had been to Western nations, major purchasers had been the Third World (Liberia, India, Iraq, Nigeria), the Peoples Republic of China, and particularly the Soviet Union. Soviet purchases reportedly were made in an attempt to balance sales to Yugoslavia of Soviet oil and gas.
Yugoslav shipbuilders were particularly competitive in export markets for a number of reasons. Yugoslav shipbuilders received a 20-30 percent tax rebate on export sales. The value of the local currency, the dinar, had been declining in value in the 1980s against the dollar and other convertible currencies. Also, Yugoslav shipbuilders had a competitive cost advantage in the production of specialized vessels. Many Yugoslav yards, in fact, had concentrated on the production of specialized ships, such as product and chemical carriers, offshore installations and floating industrial plants, and offshore drilling rigs and platforms.
The Yugoslav industry continued to be plagued, in spite of it's successes, by a severe shortage of hard currency. In order to maintain its competitiveness by offering state-of-the-art technology, Yugoslav shipyards imported as much as 30 percent of the average value of its ships from foreign sources. Major purchases included steel, electronics, radars, cranes, and propellers. Even though the Yugoslavian shipbuilding industry maintained an overall favorable balance of trade, government-imposed exchange laws limited the amount of earned exchange that shipyards can retain to only 50-60 percent. This left many yards without foreign exchange with which to make critical import purchases. One such development required Yugoslavia's largest yard to order an involuntary "vacation" in early 1983 because key raw materials were not available to maintain full production. Other industry difficulties arose as the result of payment difficulties experienced by foreign purchasers, which led to special payment rescheduling and moratoria. In addition, dependence on the Eastern "clearing" market, particularly with the Soviet Union, provided Yugoslav yards with substantial dinar profits but little in the way of hard foreign currency.
In order to overcome these difficulties, Yugoslav yards entered fields of production aimed at increasing foreign exchange inflows while reducing outflows. The production of offshore structures was one such area, the production of which was jointly undertaken by several yards. Collaboration among Yugoslav yards continued as the industry's technological level increased and more sophisticated work was sought. In addition, industry observers noted that Yugoslavian yards had increased the scrapping of old ships for raw materials in order to reduce their outlays of hard currency reserves.
Yugoslav yards hoped that their competitive cost advantage may eventually attract Western technology to take advantage of export opportunities to Third World markets. Yugoslavia's maintenance of friendly relations with numerous countries with which they did business may continue to offset the disadvantage of having a relatively small home market to service.
Yugoslavia broke up according to the boundaries of the "republics" (Serbia, Slovenia, Croatia, Bosnia, Montenegro, Macedonia). The boundaries were based on the original formation of Yugoslavia, and on historical boundaries dating from the Ottoman rule in the Balkans and even before that. The bit of coastline held by Bosnia before the breakup was around the town of Neum, and that area is still part of Bosnia. The Slovenian coast is only 46 km long. Of 760 jobs in the recreational boating industry (data for 2004), approximately half are in boat building and marine equipment manufacturing (this is almost double of the employment in the Slovenian shipbuilding sector). Over 95% of the former Yugoslavia's coastline (including islands) and thus much of its shipbuidling industry was in Croatia.
On 17 June 2009, Croatia signed an agreement with the European Commission on the restructuring of the shipbuilding industry. This has been the first considerable progress on Zagreb's way to join the EU since Slovenia blocked accession negotiations in December 2008. The reform of the shipbuilding industry, whose production constitutes 3% of GDP and 15% of Croatian exports, has been a precondition to open one of the most important and difficult negotiation areas: competition policy.
The government in Zagreb for a long time put off the restructuring of six unprofitable shipyards that employ altogether 11,000 people and remain state-owned, mainly because of their significance for the domestic economy and also due to the fear of social backlash that would be caused by layoffs. The restructuring includes halting state aid and will consist in selling off all the shipyards to private investors (through tenders), which will probably lead to numerous layoffs.
Croatia decided on the restructuring in spite of the accession negotiations being blocked by Slovenia since December 2008 due to the conflict over the maritime border between the two countries. With no chances of resolving the dispute between Ljubljana and Zagreb quickly, the Croatian authorities are trying to fulfill all EU recommendations and are thus counting on the EU countries to put pressure on Slovenia in order that it withdraw from blocking the accession negotiations.
Croatian Shipbuilding Corporation, Zagreb (CSC) was established by the Croatian Government in 1994, as the corporative organization covering the coordination of the Croatian Shipbuilding Industry on the international shipbuilding market. In 1997 CSC merged with Jadranbrod (Association Of Croatian Shipbuilding Industry, a coordination body, linking and associating shipyards and Croatian marine equipment manufacturers for nearly 50 years) into Croatian Shipbuilding Corporation - Jadranbrod. The CSC is located in Zagreb and beside other duties is also acting as National Association of major Croatian Shipbuilders. The members of the CSC are the six major Croatian shipyards.
Shipping and shipbuilding activities in Croatia have a very long tradition. Ever since ancient times this part of Adriatic sea was known for its ships and fleets. Most of our major shipyards were founded in mid nineteen and beginning of twentieth century as Austrian Naval Arsenals. They achieved impressive success in construction of warships, ranging from battleships and cruisers to submarines. In the course of years the shipyards turned to construction of merchant vessels.
Present production range of the Croatian Shipbuilders, members of CSC-Jadranbrod, consists of all kinds of Merchant ships up to 165.000 DWT, Floating docks and cranes, Special and Naval vessels. Besides newbuilding activities, Shipyard Brodotrogir and Shipyard Kraljevica are involved in shiprepairing activities. Croatian shipbuilding industry operates both on domestic and international market and export orientation is dominant feature.
Open world market policy of Croatian shipyards since the beginning of building of ships, has helped survive hard times and to keep high European level of quality and worldwide competitiveness. These achievements are due to a highly skilled working force and strong design teams, ready to meet every demand by Shipowners and to produce high quality "tailor made" ships with innovative design, and features, unique performance and extraordinary service characteristics.
Due to the size and complexity of the construction of ships, a significant part of the Croatian industry, especially small and medium-sized enterprises, are, on the basis of sub-contracts and their operations, directly dependent on this sector of industry. This branch of industry represents a significant source of employment in Croatian's regions in which major shipyards are situated (Istarska County, Primorsko-goranska County, Splitsko-dalmatinska County).
The Croatian shipyards (members of CSC-Jadranbrod) are still state-owned, but in forthcoming time they need to be restructured trough privatization process. Their weaknesses, such as technological lagging, lower productivity, inadequate structure of skilled workers, low financial potential are the main obstacles which should be resolved during the process of restructuring. Ongoing privatization process, with the general task to restructure the Croatian Shipyards, should enable them to operate on international shipbuilding market efficiently and under market principles, all in accordance with existing EU rules and regulations.
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