Ministry of State Property’s Income Exceeds Expectations Despite Crisis

Lauren Simmonds

Updated on:

As Marija Brnic/Poslovni Dnevnik writes, last year was marked by a state of emergency due to the ongoing coronavirus pandemic and several serious earthquakes, but the Ministry of State Property still managed to yield even better results than could have been expected.

According to the Annual Report on the Implementation of Specific Objectives and Reform Measures of the Strategic Plan for State Property Management for the Period from 2020 to 2022, recently published by the Ministry of Physical Planning, Construction and State Property, activities and financial effects in property purchase and activation are above expectations, and although things are weaker than they were back in pre-pandemic 2019, there was an extremely high level of income. That income came from the collected dividend from the operations of companies of special state interest and those from the portfolio of the Centre for Restructuring and Sales (CERP).

As a rule, Croatian company profit comes in its largest part in the form of income earned from property, after the emptying of the portfolio finally reduced the scope of privatisation processes, and last year the total profit of companies in which the state is a shareholder earned 946 million kuna.

Most of it relates to the so-called strategic companies, while 52 million kuna came from Croatian company profits that are in the CERP portfolio. One year earlier, the state collected slightly more from Croatian company profit than it did in pandemic dominated 2020 – 1.118 billion kuna.

The report doesn’t provide any details on payments made by individual companies, so it isn’t clear whether or not they’re all included the aforementioned figures, because for example, in INA’s case, the Croatian state and MOL agreed that the payment would be given to them as large shareholders to preserve business stability before January the 15th, 2021.

The payment of INA’s profit, from which 279 million kuna went to the state, was made the day before the aforementioned deadline. Regardless of whether this amount is added to last year’s or this year’s profit income, the effect of the coronavirus pandemic and the earthquakes which rocked the country will be felt in this year’s profit income, which, in the annual plan of the Ministry, for this year is projected to stand at only 360 million kuna.

The biggest failure has been recorded from the sale of shares and stakes in the Croatian company portfolio. For the last year, it is optimistically predicted that “classic privatisation” will bring with it 870 million kuna, but last year privatisation failed and brought not even a tenth of the expected amount, resulting in a mere 85 million kuna.

All revenue was generated through transactions of CERP, which sold shares in 42 companies with a total of 5 million kuna through public bidding, earning 34 million kuna through the stock exchange by selling shares in 12 companies.

Individually, the most valuable for the state was the procedure of withdrawing Badel 1862 from the registration fee on the Zagreb Stock Exchange, which earned it 38 million kuna.  It also earned 7 million kuna in the process of ousting minority shareholders in seven such cases.

Apart from natural disasters, last year’s election cycle also had an effect on the functioning of property management in Croatia, when the new government was followed by a transformation of the organisation of ministries and the Ministry of State Property was annexed to the Ministry of Physical Planning and Construction.

However, the matter of dealing with the registration and activation of state-owned property under the new competent minister Darko Horvat remains in focus. The report shows that last year the number of properties under said management increased by more than 500, and the year ended with 6,723 such properties, and the total value of the lease agreement stood at 96 million kuna.

However, the real estate portfolio of the Ministry of State Property was reduced last year, so even in the conditions of the pandemic, the economic lockdown and the elections, public tenders were announced and 316 contracts on the sale of property worth more than 120 million kuna were concluded.

The Ministry of State Property also emphasised in the report that after the earthquakes that hit the City of Zagreb, and Zagreb and Krapina-Zagorje counties, a significant amount of employees were engaged in recording the situation and work related to repairing damaged buildings, but also in resolving the housing of citizens whose property was damaged during the earthquake.

The growth of the number of new lease agreements slowed down, with only seventeen being concluded, worth a total of 5 million kuna, which, in terms of reforms and property activation, is a weaker achievement, so the revenues from property management were significantly “thinner” in the end than they were back in 2019, when they amounted to 210 million kuna. In 2020, that figure was 155 million kuna less.

One of the most important models of activating state property last year lay in donations for various projects, and a total of 62 such contracts were concluded last year for property worth 402 million kuna. A significant number of them relate to infrastructure projects, as well as business incubators and waste management projects.

The most valuable donated property is part of the former Dracevac barracks (with a price tag of 138 million kuna) which was handed over to the City of Split for the construction of the Technology Park and Traffic Centre, and among other things, land worth 49 million kuna on which Novalja will build the ZaglavaProzor business zone, as well as donated land and eight office buildings which were given to the municipality of Marija Bistrica for the construction of an entrepreneurial zone.

The report also looks into unplanned leasing for the use of such property, including temporary accommodation until the consequences of the earthquake are remedied, and by the end of the year, five properties were listed in this category.

From the report on the implementation of the planned reform measures and the improvement of the Ministry of State Property’s management system, one of the novelties that has just been mentioned is the establishment of the Register of Inactive Assets of State-Owned Enterprises.

All that has been stated is that a report has been put together with recommendations for the identification of non-operating assets in strategic and majority-owned companies, but without many details, while the new annual state property management plan for 2021, which recently passed public discussion, brings with it another novelty in the form of asset management – the establishment of an early warning system, which will ensure a timely response to possible instabilities in the operations of state-owned enterprises.

For more, follow our business section.


Subscribe to our newsletter

the fields marked with * are required
Email: *
First name:
Last name:
Gender: Male Female
Please don't insert text in the box below!

Leave a Comment