Croatia weighs budgetary costs for saving troubled dock

FILE PHOTO: Part of Uljanik shipyard is seen in Pula
FILE PHOTO: Part of Uljanik shipyard is seen in Pula, Croatia, August 20, 2018. Picture taken August 20, 2018. REUTERS/Antonio Bronic

March 20, 2019

ZAGREB (Reuters) – Croatia will decide in coming days whether to place troubled shipbuilder Uljanik into bankruptcy or try to restructure the business at a cost to the state of around one billion euros, a top official said on Wednesday.

Last month Uljanik, the country’s largest shipbuilder, chose local rival Brodosplit as a strategic partner to restructure its operations, with Italian shipbuilder Fincantieri acting as an adviser in the process.

“The restructuring would cost us 1.009 billion euros ($1.15 billion), while bankruptcy would cost us 557 million euros,” Branko Bacic, a leading official of the biggest party in the ruling coalition, the conservative HDZ, said after a meeting of the ruling conservative-liberal coalition.

“Now we know the figures, but given the significance of the issue not just for Uljanik, but for our shipbuilding industry as a whole, we took a few days more for a decision,” he said.

Uljanik, which owns two shipyards in the northern Adriatic cities of Pula and Rijeka and is 25 percent owned by the state, has been working to stave off bankruptcy due to liquidity problems that began in 2017. Workers staged strikes twice last year over unpaid wages.

The latest difficulties for the government arose when it became clear that restructuring costs might reach two percent of the country’s gross domestic product.

Some analysts believe that shipbuilding no longer holds strategic importance for Croatia, meaning further state funding to save the dock would be the wrong economic choice.

Economy Minister Darko Horvat said on Wednesday that despite the lower initial cost of bankruptcy, it was debatable which option was more favorable in the long run.

The government has already paid out 3.1 billion kuna ($474.57 million) on the basis of state guarantees extended in previous years to help Uljanik stay afloat, driving the general budget into deficit in 2018.

Sound public finances and lower public debt, which is currently just below 75 percent of gross domestic product, are important to Croatia’s drive to adopt the euro in the next four to five years.

Croatia’s once-prosperous shipbuilding industry has struggled since the collapse of Yugoslavia in the early 1990s, losing business to competitors, particularly in South Korea and other Asian nations.

Croatia has spent more than 33 billion kuna in the past 25 years to save and then sell state-owned shipyards, but those efforts yielded little success.

(Reporting by Igor Ilic; Editing by Kirsten Donovan)

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