ZAGREB (Croatia), April 7 (SeeNews) – The takeover of Croatia's troubled concern Agrokor by the state, under new emergency legislation that aims to shield the country's economy from big corporate bankruptcies, could lead to big problems for Croatia, an independent Zagreb-based economic analyst has told SeeNews.
Agrokor is too big for the Croatian government to handle and the situation could turn dramatic, Guste Santini said in response to a SeeNews inquiry.
"Although Agrokor is a system of medium size on a European scale, it is too big for Croatia. The multiplicative effects of Agrokor are an unavoidable fact, which must be respected both in Croatia and in the other countries where Agrokor operates", he said. "The potential domino effect that can be caused by Agrokor is dramatic".
Speaking to SeeNews on Thursday, Santini could not foresee that as soon as Friday, the owner of Agrokor, Ivica Todoric, would decide to hand control over Croatia's biggest private concern to the state.
Todoric announced on Friday he is activating the emergency legislation drafted by Croatia's government in response to financial troubles that emerged at the food and retail group earlier this year. The law, which was passed by parliament on Thursday, allows the government to appoint temporary administrators to lead a restructuring process at the request of the company's creditors or the debtor itself.
Santini instead praised Agrokor’s chief restructuring officer, Antonio Alvarez III, who on his first day in office earlier this week addressed the public and, in doing so, relieved the built up stress.
Alvarez was appointed to lead the concern’s restructuring process following the initialing of a standstill agreement between Agrokor and its six largest debtors, which promised to refrain from forcibly seeking payment of money owed to them during the defined period.
Santini pointed out that that the standstill arrangement was essential in preventing the bankruptcy of Agrokor.
“The standstill is a necessary break which allows the leading team to identify the true state of the company, make a diagnosis and take action. Otherwise, bankruptcy would have ensued”.
Santini opined that a whole range of companies are likely to be excluded from the ailing concern under the restructuring process which aims to restore its liquidity and ensure business continuity.
„Restructuring represents a complete redesign of the system being tackled (...) It simply means dissatisfaction with the existing model and a search for a new one. In this sense all conceivable solutions are possible,“ Santini said.
Although he was on board with the goings-on in Agorkor, Santini warned that Croatia’s neighbours, economies where the concern operates, should be included in the restructuring process.
“Restructuring will redefine the existing business policy of Agrokor with a sole purpose - to increase efficiency. Agrokor has, whether we like to admit it or not, applied the needs of the economies, in which it operates, in its business policy. This will no longer be the case, so disappointments are possible”, Santini explained.
The economic expert also warned that it must be understood that Agrokor’s troubles aren’t only an economic problem, but a social one too.
Santini said jobs will need to be cut. “Restructuring everywhere and always means an increase in efficiency, which implies a decline in employment,” he said.
The Croatian concern currently employs some 60,000 workers, including 20,000 in neigbouring Bosnia and Serbia.
Banja-Luka based economic analyst Zoran Pavlovic told SeeNews Bosnia's authorities should have met with representatives of Agrokor's local units months ago in order to minimise the impact which the concern's financial troubles will have on the country.
"Today, we can only hope that the institutions, inspection bodies and chambers of commerce will place under their control the units' operations, so as to make sure there is no capital outflow to Zagreb and ensure they continue to operate", Pavlovic said.
Pavlovic, however, noted he is not sure whether the Bosnian authorities will act.
"I'm not sure the institutions are aware of their obligations and I doubt they will take action at this crucial moment", he said.
Agrokor's Konzum controls 36% of Bosnia's retail market, one spot behind the leader, local retailer Bingo, which has a 42% share.