Swot Analysis & Privatisation In Croatia

Legal framework for privatisation in Croatia was based on two key laws: the Transformation Act of 1991, and the Privatisation Act of 1993, amended in 1996. Early start of privatization process in 1990s in Croatia was marked by the transformation of socially-owned companies into stock holding companies or limited liability companies. The first step (1991- 1993) of this process of almost 2700 companies which entered privatization was their evaluation and transformation into private ownership entities. The second step (1994- 1997) consisted of privatization of CPF portfolio. The portfolios change constantly, not only as a result of privatization but also because companies themselves change, as does their position in the market. The third step (1998) in the privatization process was voucher privatization. Privatisation of large infrastructure and utility companies designated as public enterprises began in 1999 (CroatianTelecom) and INA in 2002 (public enterprises are privatised on the basis of separate laws). Attempts to discuss privatization in Croatia in terms of SWOT analysis have been motivated by the stark difference among Croatian professional economists in an appraisal of Croatia's performance during the transition process in general and of the privatization process in particular. Therefore we considered the elements of SWOT analysis to be an acceptable way to delve into the confusing world of bickering arguments on the state and perspective of the Croatia's privatization process. In this paper we have tried to provide an impartial approach by employing two criteria i.e. strength and weaknesses in judging the events and results of the privatization process in Croatia. Strength of the overall privatization process can be mostly ascribed to the institutional swiftness on micro as well as on macro level. On the micro level 80% of the companies were formally privatized in the first two years despite unfavorable external conditions comprising the economic consequences of war. On the macro level it took approximately three years to restructure and downsize CPF majority ownership in 2700 companies to majority ownership in just 70 companies. Overall weakness of the restructuring process is concentrated in a painfully slow emergence of sound business activity in market environment. The economic inefficiency of this model is reflected in the substitution of modern entrepreneurial capitalism, which was hoped for, with retrograde rent seeking capitalism, typical of early capitalism in its transition from a feudal to an industrial environment two centuries ago. Instead of efficiency and development, it is characterized by the drain of liquid capital through inflated debts, false reserves and falsified claims, and the tunneling of constant capital through “soft” loans into tax havens outside the country. Therefore, the solution is not to deal with the consequences, which are evident in various affairs that are treated as individual deviations of the more or less good model of privatization. The problem lies in the model itself.