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article imageCroatia's shipbuilders struggle to stay afloat

By Lajla VESELICA (AFP)     Dec 18, 2018 in Business

Late wages, mass strikes, scrapped contracts -- Croatia's once-thriving shipbuilding sector is sinking, in one of the last gasps of the region's communist-era industrial giants.

The towering cranes looming over Pula port have been frozen still for weeks as an eerie silence hung over the shipyard, where hundreds of workers from Croatia's biggest shipbuilding group Uljanik have been on strike for most of the past two months.

They took to the streets in October for a third time this year after not receiving September's wages, but trickled back on Monday after announcing a temporary "pause" in their latest walkout to help out unhappy clients.

"The situation is bad, wages are late, people are leaving," Orce Stojkovski, a 48-year-old shipfitter, told AFP from the port on Croatia's northern Adriatic coast.

"We are nearing a moment when there will be no one left to protest, let alone build a ship," he said, showing photos of an August demonstration and pointing out the former colleagues who have since quit.

About a quarter of Uljanik's 4,500 workers, split across two docks, have packed their bags since January, mainly to seek work abroad.

It has been a painful unravelling for a company at the heart of an industry that used to be a source...
It has been a painful unravelling for a company at the heart of an industry that used to be a source of pride for the whole of former Yugoslavia
Denis LOVROVIC, AFP

Meanwhile, clients from Canada and the Cayman Islands have cancelled contracts for nine ships this year, deepening the woes of a debt-laden firm on the brink of bankruptcy.

The cancellations were over Uljanik's "inability to deliver ... in line with contract terms", according to statements published on its website.

It has been a painful unravelling for a company at the heart of an industry that used to be a source of pride for the whole of former Yugoslavia.

During their heyday in the 1980s, Croatia's shipbuilders were a venerated group whose business was ranked third on the global market.

But the 1990s independence war that helped spur the collapse of Yugoslavia, followed by a tough transition from a state-controlled to a market economy, took its toll.

Overstaffing, outdated technology, poor management and lack of an overall industry policy have added to the dysfunction.

It is a familiar story across the Balkans, where state-run industrial giants in former Yugoslavia, from metals plants to car builders, have struggled to privatise and sunk into debt.

An industry workforce of more than 21 000 during its peak has now shrunk down to 6 000 spread across...
An industry workforce of more than 21,000 during its peak has now shrunk down to 6,000 spread across the four main construction docks
Denis LOVROVIC, AFP

Croatia now ranks 13th in the world order book with 0.6 percent of the market -- a tiny sliver compared to the 80 percent market share controlled by China, South Korea and Japan.

An industry workforce of more than 21,000 during its peak has now shrunk down to 6,000 spread across the four main construction docks: Uljanik, 3. Maj (also owned by Uljanik), Brodosplit and Brodotrogir.

- Slow pivot -

Restructuring Croatia's shipping industry was a key plank in the country's entry into the EU in 2013.

But analysts say its four main shipyards have failed to adapt to market trends as business shifts from Europe to Asia.

Analysts say Croatia's main shipyards have failed to adapt to market trends as business shifts ...
Analysts say Croatia's main shipyards have failed to adapt to market trends as business shifts from Europe to Asia
Denis LOVROVIC, AFP

The European docks still open have survived by pivoting to more sophisticated ships such as cruisers, after they stopped being able to compete with Asian giants on ships like tankers or bulk carriers.

Some also diversified their production to include steel construction, wind farms or oil platforms.

"Ships dominated by steel and work were replaced by ships dominated by technology," economic analyst Damir Novotny said.

But Croatia has been slow to upgrade its technology or invest in education, he stressed.

Hefty state funding has barely kept the industry afloat.

The government, which still owns a 25-percent stake in Uljanik, has pumped around four billion euros ($4.1 billion) into the sector in recent decades, according to the Institute of Public Finance.

The state also offered more than 500 million euros guarantees for loans to Uljanik.

- 'Sacred' ships -

In March, Uljanik chose a local firm as a strategic partner to restructure the company.

But the rescue plan was rejected by Brussels because of excessive state participation in the process. A new plan is now under review in Zagreb.

"If it will not be accepted we are facing a bad scenario -- bankruptcy or liquidation," warned Djino Sverko, a union leader.

Bankruptcy could herald "the end of Croatia's shipbuilding industry as a whole."

Union leader Dino Sverko warned that the industry faces bancruptcy if Brussels rejects Uljanik'...
Union leader Dino Sverko warned that the industry faces bancruptcy if Brussels rejects Uljanik's rescue plan
Denis LOVROVIC, AFP

That would leave him and thousands of others without a job, adding to Croatia's 8.4 percent unemployment rate.

"Uljanik is 162 years old, this work is sacred to us," he added.

"It would be like a mother abandoning her child over protruding ears."

The sector, accounting for around two percent of the GDP, also supports thousands of subcontractors as well as trade schools, universities, and insurance firms. Its collapse would affect them all.

In Pula, three ships -- a polar cruise, a dredger and a livestock carrier -- are sitting at the dock, waiting to be finished.

Now, like the rest of the country, it is tourism that is bringing the biggest boon. Many shipbuilders are renting their apartments on the Adriatic coast to cover gaps in their pay.

But there are fears Croatia cannot live on tourism alone, which makes up 20 percent of its GDP.

"We cannot think of Pula without Uljanik," said the city's mayor Boris Miletic.

"It is part of Pula and the Istria (peninsula's) identity."

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