29/01/2002

THE DIPLOMATIC LETTER N°56
Economic Growth and EU Membership:
Top Priorities for Croatia

H.E. Bozidar Gagro, the Ambassador of Croatia to France, speaks of his country's regional role and the political and economic challenges it must overcome in its campaign to join the EU, underscoring French interests in future developments in Croatia.
  Version française/french version

THE DIPLOMATIC LETTER: Mr. Ambassador, in light of Croatia's position within Europe and in Southeast Europe, would you describe the primary objectives of Croatian foreign policy for our readers? What role would your country like to play on the regional stage?

HIS EXCELLENCY BOZIDAR GAGRO: Our primary objective is to join the European Union as soon as possible. First and foremost, because we feel very firmly that we are an integral part of Europe, in terms of our geography, history and culture. Another reason we chose this direction is because we see EU membership as the best way to speed up our own development. We have also taken note of the tremendous progress in various countries, both during the preparation process and since they have been EU members. Spain, Portugal, Greece and Ireland all come to mind. This progress is due not only to the aid provided through European funds, but primarily to the restructuring and modernizing of their respective economies, and to aligning their legislation on EU norms. In addition to this rapprochement with the European Union, Croatia, with its security in mind, is already building closer ties with the Atlantic Alliance in view of becoming a full-fledged member.

With this ultimate goal ever in mind, Croatia has nonetheless remained active in several regional associations and organizations with economic and political agendas. This is the case, for instance, with the Central European Initiative (CEI), and with the Stability Pact.

Finally, good relations with neighboring countries is naturally a prerequisite to any wider form of integration. As we all know, ten years ago Croatia went through a very painful crisis that was the direct result of the breakup of the former Yugoslavia and the resulting war. I am happy to confirm, as is rightly noted in political circles, that Croatia is no longer part of the regional problem, but part of its solution. This does not mean Croatia has any intention of playing a leadership role, but merely that it will meet its responsibilities. We still have to work out a few minor border issues with Slovenia and, more importantly, with the Federal Republic of Yugoslavia. There is also the very thorny question of the return of refugees and, above all, the complex situation that continues to prevail in Bosnia-Herzegovina. In any case, these issues are not pressing enough to disturb our calm approach to building good future relations with our regional partners.

How do you explain the breakup of the Yugoslav Federation, ten years after Croatia gained independence? What are your thoughts on the way events have unfolded in the Balkans? What conditions will have to be met in order to bring lasting stability to the region?

The oft heard idea that it might have been possible - even desirable - to preserve the former Yugoslavia is pure speculation, with very little foundation in serious political analysis. Once the great expansion of Europe had been set in motion towards the unification of only sovereign peoples, Yugoslavia, like the USSR and Czechoslovakia, lost virtually all chance of survival. What is more, I have never laid any credence in the theory that so-called "ancestral hates" stirred up the crisis and brought on the final breakup of the former Yugoslav Federation. On the other hand, I am convinced that the various components of the federation had developed hopelessly conflicting interests: the smaller communities wanted more autonomy, while the largest group sought ever greater hegemony. Moreover, we cannot forget the rigid, conservative and frankly reactionary character of the federal bureaucracy, which opposed all change. This was particularly true of the army, in my opinion.

The international community finally managed, with great difficulty, to contain the crisis in Bosnia-Herzegovina. After an even more forceful intervention, it brought the situation in Kosovo under control. But the unrest, which is an indirect result of the fire of contention sparked by Milosevic, has finally spread to Macedonia. One of Macedonia's Albanian leaders even declared this past summer that their rebellion was the final act in the breakup of the former Yugoslavia. We have very good reason to wonder if it will ever end! There is still the possibility that Podgorica will pass a referendum in favor of independence, which would result in the separation of Serbia and tiny Montenegro, most likely on friendly terms. That possibility raises questions that seem much less dramatic today than they did back in 1991. In fact, the international community appears to be much more concerned about them than Belgrade itself.

It is, nonetheless, unlikely that there will be real stability in the Balkans anytime in the near future. The seat of unrest has shifted to the south, primarily to the area populated by Albanians. Slovenia, another former Yugoslav republic, has long considered itself to be safeguarded from the upheaval in the Balkans, and quite rightly. Croatia, for its part, is no longer concerned by the principal problems. But the other countries in the region are still affected, to a greater or lesser degree, by this zone of unrest.

Ten years ago, Mr. Stepjan Mesic told Milosevic he would end up swinging from a rope. He now says he is willing to testify against Milosevic. Do you think it is really his place, as President of Croatia, to take on that role? Couldn't it endanger the friendly relations between your two countries, which have been so very difficult to rebuild?

The President of Croatia, Stepjan Mesic, has said in the past that he was willing to testify against Milosevic in The Hague. Let me underscore the fact that the International Criminal Tribunal (ICT) has brought three different counts of indictment, each one of the utmost gravity. We must not forget that the former president of Yugoslavia is accused of crimes against humanity in Croatia and Kosovo, and of genocide in Bosnia-Herzegovina. What's more, Serbs will also undoubtedly come forward to testify against him. As the Croatian President has said on several occasions, Milosevic is accountable to the Serbian people just as well. There is absolutely no reason for this to harm our relations. Moreover, Mr. Mesic has already gone before the ICT as a witness back in January 2000, long before becoming the president of Croatia. It did spark the ire of certain political circles in Croatia at the time, mainly because he denounced Franjo Tudjman's policies in Bosnia. President Mesic is a man of rare integrity who is not afraid to speak his mind. But personally, I do not think he will testify in The Hague again. There are many, many other witnesses who have just as much to say.

How are Croatia's current relations with Serbia and Bosnia?

We consider our relations with Bosnia-Herzegovina and Serbia to be of the utmost importance. Apart from two questions over borders - one along the Danube, and the other at the mouth of Kotor Bay, across from Montenegro - Croatia does not have any territorial disputes with present-day Yugoslavia. The Croatian government and the Croatian people welcomed the democratic shift in Serbia after the elections on 24 September 2000, and the ousting of Milosevic. Were it not for the palpable scars from the war and the attacks waged against Croatia in 1991, which are still strongly felt in certain regions, it would undoubtedly have taken much less time to reestablish normal ties with democratic Serbia. There is tremendous potential that could be tapped by building stronger ties between our two countries. No one understands this better than businessmen. Entrepreneurs from both countries have already taken the very first concrete steps in this direction.

As concerns Bosnia-Herzegovina, it is important to understand that its independence and territorial integrity are imperative not only to finding a political solution to its internal problems, but also to guaranteeing the stability of the entire region. This principle is square one of Croatia's policy towards Bosnia-Herzegovina. The Dayton Accords, however imperfect, did identify this as the primary condition. All serious doubts on this issue have since disappeared. Having said that, the internal integration process has been very difficult and is still extremely shaky. One thing is certain: the representatives of the international community no longer come to Zagreb looking for a solution acceptable to the Croats in Bosnia-Herzegovina. As a cosigner of the Dayton Accords, Croatia is certainly not indifferent to what is happening in our neighboring country. We do however believe that Bosnia-Herzegovina's local democratic institutions alone are capable of coming up with effective consensual solutions.

On the heels of Croatian President Stjepan Mesic's visit to France in May 2000, the visit to Croatia on 9 November 2000 by French Minister of Foreign Affairs Hubert Vedrine, and the Zagreb Summit on 24 November 2000, Croatian Prime Minister Ivica Racan's state visit to Paris on 14 May of this year offered further proof of France and Croatia's excellent bilateral relations and their desire to enhance them. The visit took place on the same day as the signing of the Stabilization and Association Agreement between Croatia and the European Union. President Chirac's recent visit to Zagreb, in December 2001, further bolstered the very promising relations between France and Croatia.

Despite the ousting of Milosevic and his arrest and transfer to the ICT, relations remain strained. After the dangers posed by Greater Serbia, are you afraid of the Greater Albania beginning to take shape with the crisis in Macedonia?

No one knows what is going to happen in Kosovo, or in western Macedonia. One thing is certain: if the Albanians repeat the errors of the Serbian nationalists who dreamed of building Greater Serbia, they will only cause new material damage and even greater human suffering. They too will ultimately suffer a resounding defeat. First of all, experience has shown that anachronic political projects of this sort are doomed to fail. Secondly, the international community has chalked up experience in this area, after its first faltering attempts in Croatia and Bosnia-Herzegovina. It will not let things get out of hand, especially now that it has international forces in the area.

There is still very good reason to believe that the situation will eventually improve. The elections held in Kosovo on 17 November offer a ray of hope. Isn't it possible that the ethnic Albanians in Kosovo, Macedonia and Albania will one day feel reassured that their rights are respected in the countries in which they live, and will thus encourage each other to embrace what I would term a "plural ethnic group," which would respect their similarities as well as the individual nuances of each branch of the Albanian nation? This could lead to the creation, sometime in the future, of different institutional structures on the different sides of the current federal and national borders - if they are maintained. But it is of utmost importance that these borders not be changed unilaterally or, even worse, by force.

Let's turn to the issue of international security. During a conference at the French Institute of International Relations, Croatian Prime Minister Ivica Racan said that joining NATO was the country's primary objective. Do you agree that the Atlantic Alliance is the best way to safeguard peace in Europe? If so, where does the Common Foreign and Security Policy fit in with this?

Croatia's Adriatic coast, led by the port of Rijeka (above-mentionned), in front of the Peninsula of Istria, is of vital importance to the country's tourism and sea transport industries. The region's seaside resorts where the first areas to experience a mild revival of activity in the tourism industry.

The biggest and undeniable advantage of the Atlantic Alliance is that it already exists. The Common Foreign and Security Policy, on the other hand, is still a largely "virtual" entity. In view of the unexpected developments on the international stage, there has been much talk recently of making major changes in NATO and in its role for the future. This has been spurred primarily by the new world order that is steadily taking shape with the unexpected involvement of Russia and China, even Iran, in the coalition against international terrorism. This has not, however, had any apparent impact on the project to build a stronger partnership with the European members of the Alliance, in view of NATO's eastern enlargement. It is no coincidence that almost every country in Central and Eastern Europe would like to join NATO. Ten European countries are already waiting in line. Croatia cannot afford to remain by itself on the sidelines, even if it does later take its rightful place in the European defense system, once it has been set up. Croatia is still in the "intensive talks" stage with the Alliance. The next stage is called the "MAP": the Membership Action Plan. It is the very last step before membership. Croatia is already partly covered by the NATO umbrella, which is reflected in the increased confidence foreign investors have shown in the Croatian market.

It has taken longer than expected to set up a market economy in Croatia. What is holding up the reforms? Would you outline the government's priorities in this area for our readers?

No one expected this process to be so difficult, or that there would be so many setbacks in the early 1990s. Croatia has been forced to simultaneously privatize and restructure. Many companies were privatized in a rather dubious manner, to say the very least. Vague laws and collusion between unscrupulous buyers and political officials are the principal reasons why various companies, both large and small, have been swindled or pushed into bankruptcy. This explains why the great majority of the Croatian public was calling for a systematic review of the legality of all prior privatizations on the eve of the parliamentary elections held in early January 2000. The key reasons behind the rapid deindustrialization of the country during this bygone period have yet to be identified. It was most likely caused by the combination of a deliberate choice to abandon unprofitable programs, on the one hand, and on the other, an attitude I would describe as "irresponsible" since it brought on the well-known adverse effects of "unrestrained economic liberalism." In light of past mishaps, the entities that now manage these specialized public funds are being extremely vigilant. They do not move forward before obtaining all the necessary guarantees as to the quality of the restructuring or the consolidation proposed by the company or the sector in question. In other words, they verify that they are truly capable of carrying out the privatization in optimal conditions.

As far as joining NATO is concerned, the Croatian government already met one of the main goals on its agenda for 2000-2004 when Croatia became a member of the Partnership for Peace on 25 May 2000. The Secretary-General of NATO, Lord Robertson, welcomed Croatia by expressing his satisfaction with the new government's policies, encouraging Croatia to serve as an example for other countries in the region. Five days later Croatia became an associate member of NATO's Parliamentary Assembly, the highest possible standing for countries participating in the Partnership for Peace program. (Photo: Lord Robertson, NATO Secretary General, and Mr. Ivica Racan, the Prime Minister of Croatia).

Croatia is a country with great tourism potential. There is a very pressing need to privatize our tourism infrastructure. Other sectors have kept their monopolies intact. This is true in the electricity industry, with gas distribution, as well as transport companies. In these areas, the "maturation" process is going to take a little longer. After selling off the majority of its holding in the highly valuable national telecommunications company, the Croatian government is once again pushing forward in this same direction. It is getting ready to sell Croatia's largest insurance company, a stake in its leading petroleum group INA, two or possibly three banks, and a number of smaller firms.

The European Union accounts for two-thirds of total foreign investment in Croatia, with just 2 % coming from France. Does Croatia offer any business opportunities of particular interest to French industrialists? During a visit to France by Zeljko Pecek, Croatian Minister of Small and Medium Businesses, the groundwork was laid for a cooperation agreement between French and Croatian small- and medium-sized businesses. Will this open up new prospects for French firms in Croatia?

While Croatia has no shortage of capital, like most countries in transition it does need foreign investment first and foremost. Recent legislative reforms have heightened the transparency of Croatian procedures, opening the way for greater opportunities. The basic legal framework is already in place. An agreement designed to encourage investments was signed in 1996, while the accord between France and Croatia aimed at eliminating double taxation will come into effect very shortly, to mention just two examples.

Trade between France and Croatia has grown steadily in recent years, climbing to $US 560 million in 2000. Croatian exports to France grew by 35% over the first eight months of 2001. French exports to Croatia fell 15% over the same period. France still has an annual trade surplus with Croatia of roughly $US 200 million. As a trade partner, France has lost considerable ground to Germany and Italy, Croatia's leading supplier and leading client. France was nonetheless Croatia's 6th supplier and 7th client in 2000, which offers encouraging proof that trade between our countries continues to steadily grow. France's market share currently stands at 7.1%. It could be expanded in the consumer goods and food sectors, where France has yet to make a real mark. The expansion of Croatia's tourism infrastructures is another one of our leading objectives. France's specialized firms are highly renowned for their skills and know-how in this sector. If they put forward higher quality offers, and help Croatia fight unemployment, they will win our government's support.