INVESTMENTS ON THE ADRIATIC Olav Dalen Zahl, CEO of the Norwegian company Olympia Holding that has planned great investments from Rovinj to Dubrovnik Rudjer Friganovic, State Secretary in the Ministry of the Economy, recently announced for the national television station HTV that the government does not have a "Plan B" to save and restructure the Croatian shipyards, and that the sale of the shipyards 3.Maj, Brodosplit and Brodotrogir is the only option for their survival. Perhaps he made such a statement based on instructions from the European Union, which has demanded that Croatia must privatise its shipyards and only after privatisation will they be able to take new orders. On the same day as this statement, Olav Dalen Zahl, CEO of the Norwegian company Olympia Holding spoke with Nacional. Zahl is one of the key Norwegian business people who have created the Norwegian investment plan for massive plots of land, vacation resorts, luxurious villas and other property from Rovinj to Dubrovnik.

The Norwegian investors purchased this land from Serbian companies and natural persons in Croatia that the Croatian government seized by virtue of a decree on 31 December 1990 and registered as government property. The Croatian government will have to return the seized property or give proper financial compensation to the claimants where it is not possible to return the property. However, now the Norwegian investors are owners of a great deal of those claims, and are currently negotiating with the Croatian government to resolve this issue.

They have proposed to the government that they invest their claims into saving the Croatian shipyards. The Norwegian investors plan to order 20 ships from Croatian shipyards over the next three years, which would fill the order books to capacity and would free up the state from paying state subsidies for that period. As such, they were very surprised by Friganovic's statement. In his conversation with Nacional, Olav Dalen Zahl commented on Friganovic's statement, explained why the Norwegian funds began to buy up the seized Serbian property in Croatia, and why they want to invest in Croatia's shipyards.

NACIONAL: How do you comment on the statement by Rudjer Friganovic that the government has no "Plan B" to save the Croatian shipyards?

- I was very sorry to hear that statement, though it is partly understandable if it was said THE ZASTAVA BUILDING in Zagreb is one of many very valuable properties the Norwegians have purchased from Serbiaunder pressures by the European Commission. However, our offer would help the shipyards sell more easily and to earn more money. The decision of the European Commission to ban the shipyards from receiving any new orders until the completion of privatisation is unjust and without any business logic. Privatising the shipyards under such circumstances will likely results in a complete closure of the shipbuilding industry in the next 12 months. Even in excellent conditions, it is difficult to sell a shipyard without orders, let alone now when the global industry has been very hard hit by the consequences of this recession. Therefore, our group has been working intensively since spring on a proposed shipbuilding programme that would involve all the capacities in the Croatian shipyards. We have already worked out the content of the contracts with most of the shipyards, and are just waiting to sign. This is a programme worth EUR 500 million, and just as much in options. This shipbuilding programme would secure jobs, and the government, as the current owner, would give the shipyards a certain value in privatisation without any subventions, while we would meet our business objectives and receive high quality ships that the market recognises and prizes. We were very flexible in terms of prices, deadlines and types of ships, but we made the owner face up to the challenges of abiding by the terms from the Succession Agreement, which they committed to seven years ago. We believe that our activities since this spring have been recognised as well intended partnership activities. We are ready to get involved if there is will on all sides. This could all be pulled together very nicely, if the government accepts our model, which would resolve the issue of our ownership over seized Serbian property in Croatia.

NACIONAL: Why did you invest in buying seized Serbian property in Croatia, and what does that have to do with investing in Croatian shipyards?

- This connection is seen in our intent to resolve our claims from the Croatian government, concerning the seized Serbian property, by investing in the Croatian shipyards. We invested in buying the seized Serbian property in Croatia, as it seemed to us to be a good business investment. The representatives of Recap International began to buy the claims of Serbian companies from Croatia five years ago regarding property seized by Croatia at the end of 1990. However, this issue will need to be definitely resolved one day and the definite legal framework for its resolution was set by the multilateral Succession Agreement and its Annex G. Annex G states that issues of ownership over property and assets that were under the ownership of Serbian and other companies in Croatia to 31 December 1990 must be resolved according to the standards of international law, independent of nationality, citizenship, or residence of the owner of that property. That means that any trading of that property is proclaimed null and void. Considering that the Croatian Privatisation Fund has already sold a great deal of that property, the Croatian state now has to pay fair compensation to the true owner. For us, this was virtually a risk-free investment, as the Succession Agreement is a higher instance that the Constitution and must be respected. However, we have been quite flexible in the collection of our claims, and have thus proposed an interesting solution to the government.

NACIONAL: And what solution was that?

- We offered that the government issue us a confirmation that it would pay us these claims over a few years. Based on these claims, we would take out loans abroad and invest the entire loans into the failing Croatian shipyards. In this way, we would invest about a billion euro in the shipyards. In addition to the loans, we would invest about 250 million euro of our own money to revive the 3.Maj shipyard and shipyards in Split and Trogir. This would allow those shipyards to work at full capacity, without a kuna of state subsidies, for at least three years. We would order the construction of 20 large ships, a product and chemical tanker, and a PCTC car carrier. These are all ships that could be constructed much cheaper in South Korea than in Croatia, but we have calculated a way to do business in Croatia.

NACIONAL: What kind of calculations are these?

- These are primarily our contacts in the business world. Furthermore, the Croatian shipyards have a good reputation as they build high quality ships. We bought the claims for this investment with a discount, so that we did not pay full price. This also opens some room for profit. We in Norway have experience with shipbuilding and with selling ships, and some of our co-owners and partners have great experiences in the shipbuilding world. We might even become co-owners of part of the fleet built in Croatia.

NACIONAL: In what phase are your negotiations with the Croatian government?

- We had a meeting with Economy Ministry Djuro Popijac in July, and we were very satisfied with how things unfolded. I think that our initiative was well received, especially since we did not insist upon advance guarantees for the construction of the ships, which is usually something that everyone insists upon. We agreed that the government should develop a precise model of cooperation. The government people we spoke with said that everything needs to be very well prepared, and that several state institutions would have to be involved in the negotiations, so as to avoid being later accused of making mistakes in the negotiations. We think that this can be very simple cooperation, and that the government will soon realise this, and that we can all profit from this cooperation. That is why we hope that the negotiations will speed up in the fall and soon enter into the final phase. That is why I personally have come to Zagreb, so see if we can speed things up.

NACIONAL: Are you interested in taking over the Croatian shipyards?

- Not at the moment, but this investment cycle could help the shipyards to get back up on their feet. Through our contacts, we would ensure that these 20 ships are sold, and the Croatian shipyards could be in a position to take on new orders, and perhaps to take on strategic partners. Regardless, in our negotiations with the government we will likely touch upon the issue of ensuring advisors that would help in restructuring. These shipyards are presently in substantial difficulties, but these can be overcome. It is possible that they have surplus employees, but in the case of our cooperation, they would be working at full capacity for at least three more years. Furthermore, it is not excluded that we would offer to bring in various financial experts that could help in analysing the situation in these shipyards. That is why we feel that there has been unfair pressure by the European Commission to privatise the shipyards before they continue to take on new work orders.