Croatia faces painful shipbuilding reform

Croatian Economy Minister Damir Polancec recently appeared to suggest that local shipyards may face closure if they are unable to run profitably once the country joins the European Union. The EU candidate’s five shipyards survive mostly thanks to high state subsidies. A restructuring plan has been in the works for almost two years, with few details revealed, and closures have never been publicly mentioned.

“We want to make our shipyards profitable in line with the level of state support tolerable in the EU. If we do not manage to prove it possible in some of our shipyards, we?ll have to seek other solutions but with full protection of the rights of those employed,” Polancec told a gathering of local employers.

Overhaul of loss-making industries, and most notably shipbuilding, is one of the major conditions in Croatia’s accession talks, which the former Yugoslav republic hopes to conclude by the autumn of 2009. “By the end of April we will have definite individual plans for restructuring of all our shipyards,” Polancec said.

He said the government wanted to start the sale of two northern Adriatic shipyards, i.e. Uljanik and Kraljevica. Uljanik is the only dock not running up losses. “We’ll try to follow the recipe we have already applied on loss-makers in steel industry, find investors who will be ready to pour in fresh capital and modernise production without massive lay-offs,” Polancec said.

Shipyards are one of the most sensitive social issues in Croatia’s EU talks as the sector comprises tens of thousands of employees and dependent businesses. That is why the process has been slow so far.