Croatia Defence and Security Report Q2 2008

Publication Date	May 2008
Publisher	Business Monitor
Product Type	Report
Pages	48
ISBN Number	1749-1355
Product Code	BMI01886

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£425.00
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Summary

Croatia is the quintessential case of a quiet achiever. The last quarter has seen no great change in Croatia's general strategy of downsizing its army and destroying excess small weaponry. Progress on the latter was made in January 2008, with the destruction of some 7,500 weapons comprising guns, machine guns, and small cannons. The move met with the praise of the UN Security Council, of which Croatia is a temporary member with aspirations for full membership. The general picture is of a country transitioning from a risk to European security, owing to the black-market trade of excess weaponry, towards a secure European nation.

Hence, it would probably be fair to say that Croatia's security situation is improving. The Ministry of Defence is around two years into a nine-year Long Term Plan to modernise the Croatian Armed Forces (CAF). As is the case in other Central and Eastern European countries, modernisation includes reduced manning levels, increased professionalism and movement towards NATO norms. Strong existing links with NATO and the EU (which BMI believes that Croatia will join in 2011-2012) are also positives.

Significantly, Croatia's security threats are of a non-traditional kind. Whilst the old border disputes with Slovenia and Serbia always loom in the background, it is Croatia's terrain, long borders (relative to area), and convenient location (being a maritime nation which is adjacent to the EU) that together comprise the key risk to security. Taken together, they conspire to make Croatia an extremely useful country for the smuggling of drugs, arms and people. It is not clear how effective the Croatian law enforcement agencies are in dealing with these problems.

The prospects for Croatian defence industry participants are mixed. The latest signs are that defence spending and procurements, both of which grew quite strongly in 2007, will continue to rise. The decision not to reinstate EU shipbuilding subsidies has been good news for Croatian shipyards. Privatisations could result in a major injection of new capital and technical expertise. There are early signs of greater integration with NATO supply chains and global multi-nationals.

Against this, there are several challenges. It is not yet certain, following a close outcome in the November 2007 elections, that the government will remain committed to reform and privatisation. While it is likely that Prime Minister Ivo Sanader of the Croatian Democratic Union (HDZ) will hold onto power, the tightness of the contest and the subsequent need to form a coalition could force a change in policy orientation. More crucially, budget constraints are such that defence spending may stagnate even before the end of 2009, which is when we expect it to peak.

Croatia maintains a number of small deployments in a handful of countries. By far the largest deployment, of 22 soldiers, is stationed in Afghanistan as part of the NATO - ISAF programme.

Finally, the February 2008 declaration of independence of Kosovo from Serbia could lead to tensions in the region.

Content

Executive Summary .........5 SWOT Analysis.................7 Croatia Political SWOT......................................................... 7 Croatia Security SWOT.......................................................... 8 Croatia Defence Industry SWOT ........................................... 9 Croatia Economic SWOT..................................................... 10 Croatia Business Environment SWOT ................................. 11 Political Overview...........12 Domestic Political Outlook....................................................... 12 Security Risk Analysis...14 BMIs Security Ratings ........................................................ 14 Risk Ratings ......................................................................... 15 Europe: Security Ratings ..................................................... 15 Table: Europe: State Vulnerability To Terrorism Index ...... 16 Regional Security: Europe................................................... 16 Overview.............................................................................. 16 Internal Terrorism............................................................... 17 International Terrorism....................................................... 18 Criminal Activities ............................................................... 19 Croatia Security Risk Ratings .............................................. 20 Croatia Conflict Risk ........................................................... 20 Croatia Terrorist Risk.......................................................... 20 Croatia Physical Safety Risk................................................ 20 Security Overview ..........22 Internal Threats ........................................................................ 22 Refugees............................................................................... 22 Small Arms And Light Weapons Proliferation ..................... 22 External Security Situation ....................................................... 23 Military Structure & Defence Industry..........................................................................................................24 Armed Forces ...................................................................... 24 Table: Regional Armed Forces (Including Conscripted) 2007 ............................................................................................................................ 24 International Deployments And Joint Exercises................... 27 Table: Croatia Deployments................................................ 27 Weapons Of Mass Destruction............................................. 27 Market Structure....................................................................... 28 Recent Changes ................................................................... 28 Arms Trade Overview ............................................................... 29 Exports................................................................................. 29 Imports...................................................................................... 30 Industry Trends & Developments.............................................. 30 Procurement Trends And Developments.............................. 30 Industry Forecast Sce33 Table: Croatia Defence Sector Historical Data & Forecasts ........................................................................................................................... 33 Table: Croatia Defence Forecast......................................... 35 Key Risks To BMIs Forecast Scenario................................ 35 Macroeconomic Forecast ..............................................................................................................................36 Table: Croatia Economic Activity..................................... 39 Competitive Landscape.40 Table: Key Players: Croatia Defence Sector ....................... 40 Company Profiles...........41 Duro Dakovic ...................................................................... 41 Riz Transmitters................................................................... 42 Elmech Razvoj ..................................................................... 43 Kraljevica Shipyard ............................................................. 44 Raytheon.............................................................................. 45 BMI Forecast Modelling .46 How We Generate Our Industry Forecasts .......................... 46 Defence Industry.................................................................. 46 Sources ................................................................................ 47

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Product features / use

Scope	Expert Insight/Opinion
Level	General Industry Strategies
Data	Detailed Market Forecasts
Profiles	Profiles of Key Companies
Features	Contains SWOT Analysis
Extra Info	Consumer Trends Highlighted