December 20, 2020 – The European Union has so far recorded over 300,000 deaths caused by the coronavirus pandemic, with the second wave being 50 percent more deadly than the first one. It is easily possible that the total number will exceed half a million by the time the pandemic is brought under control. Mathematician, investor, and analyst Nenad Bakic explains why for Index.hr.

In terms of the number of deaths per million inhabitants, the new members of the European Union, the countries of the "new European Union", namely the former socialist countries – including, unfortunately, Croatia – are in the lead. Some of them have several tens of times more deaths in the second wave than in the first.

Confirmed cases of death due to coronavirus in the European Union / Source: ourworldindata.org

What is happening? Why did the virus in the second wave become so deadly in the new European Union members? By studying this example, we can learn a lot about the pandemic in general.

1. The countries of the New European Union (NE), 11 ex-socialist countries, did very well in the first wave, with only one of them among the 13 most-affected. All the governments of these countries attributed the success to themselves. In some countries like Croatia, it was done by gurus who considered themselves ideologues of barbaric imprisonment or, as they ignorantly called it, "quarantine".

Graph 1. Coronavirus deaths per million, until June 30, 2020. Source: Index.hr / JHU CSSE

They are marked in red on the first graph. A lighter shade highlights the small Baltic countries because something strange is happening there, but it doesn't matter. It is the same when we look at it without this separation.

What is the probability that the NE countries were so much more successful in their will than the older, smarter, and more experienced brothers? Maybe it's something else.

2. In the second wave, NE countries were significantly more affected, as we can see in the second graph.

Graph 2. Coronavirus deaths per million, from July 1, 2020 until December 18, 2020. Source: Index.hr / JHU CSSE

Out of the top 8 countries, they occupy seven positions. What is the probability that they are so much more unsuccessful than other countries by their own will? Very small.

Of course, it's easy to recognize a "return to the core value" here – as the virus does what it wants, most countries end up converging to a similar number of deaths. Graph 3 shows the coefficient of variation, which is the standard measure of a set's scatter.

Graph 3. Coefficient of variation, deaths from coronavirus in EU countries per million. Source: Index.hr

Here we can already conclude that the performance of the NE countries as a group has nothing to do with their governments' competencies. The probability that a group with its ability is far above average and then that same group is far below average, especially in a situation like this where the virus spreads across the continent without knowing the boundaries, is zero. Of course, some individual countries are better or worse, both in epidemic management and in treatment.

3. But things are only now becoming very interesting. The number of deaths in the second wave not only offset the one from the first wave but also shifted it. The NE countries as a group are now considerably worse than the rest, as we can see in Graph 4.

Graph 4. Total coronavirus deaths per million. Source: Index.hr / JHU CSSE

They occupy eight of the first 13 places. If we exclude the small Baltic countries, only Slovakia remains in the lower half, but the situation deteriorates quickly, and it could easily get to the upper half.

As we can see, there is something special about the small Baltic countries and Finland. We still don't know what, and it doesn't matter for this analysis either. If we single out those countries, things become clearer, but the analysis works without them.

4. What is the explanation? It can be the following:

• A. It has been shown that COVID-19 is highly seasonal. In NE countries, the epidemic came later in late winter 2020 and therefore could have done much less damage by the time spring came. This is undoubtedly the case with Croatia, as you can see in Graph 5: the reproductive factor R fell below 1 already before the end of March, before the measures were introduced on March 23 in Croatia and could take effect.

Graph 5. Source: Index.hr

The introduction of a movement prohibition and a drop in R below 1 are marked with a red and green line. An international group of the London School of Health and Tropical Medicine made this calculation, in which a member of the Croatian Scientific Council also participated. Somehow they later forgot to let us know that R had already fallen below 1 even then. However, at the beginning of the epidemic, everything was explained with its help, which advanced countries are doing now. From a time perspective, all of this is now obvious, and that first wave seems completely benign compared to this one now.

But let's remember the psychosis in which we lived then when the concept of "Camp Croatia" with GPS tracking and leaving the house every third or fifth day was already announced when the epidemic was already falling. Inexperienced and impressed by the violent measures, we thought they helped.

But why did the epidemic come later? Here I think the key is in international connectivity. I used an imperfect DHL connectivity index and got a great explanation of the difference, which can be seen in the following chart.

Graph 6. Source: Index.hr

Interestingly, even such an imperfect measure of connectivity explains so much of the variation. As we know, the most affected countries are also the most connected: Italy – densely populated Lombardy and workers from China; Italy, France, Spain – tourism; Belgium – the center of the European Union and others; Sweden – far more connected than its neighbors; and a million Swedes went on school holidays abroad in the last week of February.

• B. The first wave was actually far stronger than it seems now because we tested and hunted cases much less. Many countries found that their dark number (undiscovered cases) was several tens of times higher than those found. In our country, depending on the interpretation of the data, 50 to 80 times, in Denmark 80 (at some point). Now the dark number is probably 5 to 10 in most countries, and the current maybe even just 3 because as more and more people are being tested, and more and more people have been exposed to the virus, the significant dark number has nowhere to hide.

Therefore, most of the countries of old Europe became infected in the spring, a part of the population gained immunity, and significantly more than in the NE, which we cannot see well if we look only at the cases.

• C. It is now quite clear that strongly seasonal is not only an epidemic of SARS-CoV-2 virus but also COVID-19 disease. Clinical pictures are, on average, far more difficult now than a month or two ago. Mortality rates in most EU countries have doubled in just a month or two, meaning twice as many people die among those confirmed infected. It is also the insight of an international group of scientists in which Croatians Gordan Lauc, Alemka Markotić, Dragan Primorac, and others also participated. At first, it was controversial, but now it is generally accepted. Those infected in spring (more in the old than in the NE) had a much better chance of surviving.
• D. One explanation indeed lies in the quality of hospital systems. I believe richer countries have more resources. For example, expensive HFOT devices save lives better than respirators (Croatia has now procured a larger quantity).
• E. Other variables could be considered, such as previous flu seasons, the percentage in the population over 80, or the people in nursing homes. Still, I believe they would indicate a lower expected number of deaths in the NE (but I did not check the data).

In general, the NE countries, including Croatia, were not particularly unprepared for the supposedly expected strong second wave. Let's look at how strength and early outbreak surprised even the most advanced countries, with entirely different strategies: from Germany through Denmark and the Netherlands to Sweden. Remember that in almost all countries, politicians said "let's just wear masks, and we won't need any special measures," then "let's introduce some measures, and we certainly won't need lockdown," and so on. Now we have reached a solid lockdown in almost the entire Union.

Even Germany, the first wave model, is experiencing a real drama after a failed soft lockdown that was supposed to ensure a peaceful Christmas. Denmark and some other countries are already overtaking us in terms of the number of infected. It is not impossible for Germany to overtake us, even in terms of deaths.

In some countries, a third or "second B" wave is already being born, under the influence of winter COVID-19. R is contextual, and even if it falls below 1, under the influence of various circumstances, it can return over 1. It seems that our second wave peak was delayed by merging with that (surprising to all) the third wave.

Conclusion

• The development of the epidemic is mostly beyond the reach of the authorities.
• Countries with stronger measures do not fare better than those with weaker ones. For example, Slovenia is the worst in this group, despite introducing extreme measures before the epidemic escalated.
• The introduced travel ban is not useful. The inspiration for it was the spring ban, which was considered our most important measure, and obviously did not affect the epidemic.
• On the whole, we are not somewhat more unsuccessful than others. Indeed, although some have had significantly stronger measures for longer (this is one group we can compare ourselves to, and the other is our neighborhood shown in Graph 7, and only Serbia is better than us), we should consider any success or failure relatively. It is known that some measures work, such as banning gathering, maintaining physical distance, washing hands, ventilation, etc. The introduction of measures should be proportionate to the goal because the disproportionate introduction of measures has severe negative consequences for society. Countries that introduce brutal and unnecessary measures (there are arguments that some brutal measures even encourage an epidemic) can also cause significant collateral damage to their populations' lives and health.

Graph 7. Showing data from October 6, 2020 to December 19, 2020. Source: ourworldindata.org

Let's not forget, the goal in epidemic control is to bring the reproductive factor R below 1, and "zero-covid" strategies have long since been abandoned. Fortunately, in Croatia, R is currently significantly below 1. Let's hope that the data on the epidemic we have are credible and that such a situation will persist.

Of course, the main goal is to save as many lives as possible, although we are often helpless with the virus. Therefore, it is necessary to adhere to epidemiological measures with enhanced protection of vulnerable groups.

To read more about coronavirus in Croatia, read TCN's dedicated page.

March 12, 2020 - TCN catches up with Liza Belozerova from Google.org to discuss the exciting partner with IRIM bringing digital hope and change to Croatia's libraries.

With so much bad news around in Croatia and elsewhere, it is sometimes hard to see the positives. But if you look a little deeper than the surface negativity in Croatia, there are plenty of very exciting things going on. 

Among them is the STEM revolution, which is being spearheaded by leading Croatian entrepreneur, Nenad Bakic. Along with Mate Rimac, Bakic was named by the Financial Times as one of Europe's top 100 digital champions, and he has been putting part of his considerable energies into STEM projects to equip children from schools in Croatia and the wider region with the digital skills necessary for the future. 

The Institute for Youth Development and Innovativity (IRIM) is a Croatia-based non-profit organization (private foundation), which has developed and implements the largest extracurricular STEM program in EU – the Croatian Makers movement, encompassing now over 150,000 children in Croatia. Although IRIM originates from, and primarily operates in, Croatia, it has transposed its activities to Serbia, Bosnia and Herzegovina and Kosovo, where IRIM and local partners deliver IRIM-designed major projects (with initial funding from IRIM), reaching tens of thousands more children. Some programs are joint regional activities. Such cross-border co-operation is of utmost significance in the region which still suffers consequences stemming from the conflicts in the 1990s. You can learn more about IRIM on the official website. 

IRIM's work was noticed by Google.org, and the two joined forces in 2018 for an initial partnership worth $250,000 to expand a programme in Croatia's libraries, whereby IRIM would promote digital skills in libraries through workshops, librarian training, equipment and events. More than 1,500 workshops were conducted by librarians, and over 13,000 people took part, as Rujana Bakic explained in an earlier article on TCN (you can also see Rujana's interview with TCN below. 

Last month Liza Belozerova from Google.org was in Zagreb to present the next phase of the IRIM project, as well as announcing a second-phase funding of $400,000 for IRIM and its digital library project, as reported on TCN at the time. 

Liza was kind enough to spare a few minutes after the event for a video interview with TCN, in which she talked about the project, as well as offering some thoughts on digital Croatia in general. Thank you. 

February 19, 2020 - Croatian Institute for Youth Development & Innovation (IRIM) received the second financial support from Google for their project Digital Citizen 2.0

The goal of the project Digital Citizen 2.0 is the further development of the digital skills in local communities in Croatia, Serbia, Bosnia and Herzegovina, and Kosovo. This project is the continuation of the previous project, also supported by Google, which took place in the last school year in the schools in the region. Over 170 schools received educational technology as a part of this project, including the Boson experimental starter kit for the micro:bit pocket-sized computer, as well as 3D printers. 

At the presentation, Joško Mrndže, manager of Google Adriatic, said that Google believes that the technology needs to find its way into the everyday life of the people. He added that they're constantly inspired by the way people and children use technology in the search for knowledge, to research their passions, and to make their life easier using the technology which already is all around us. He complimented Nenad Bakić and his team in IRIM for the impressive results they were able to achieve with the limited funds they've received. 

Liza Belozerova, Economic Opportunity EMEA & Africa Lead, presented Google.org's aim to promote those programs which use technology to tackle social challenges. The development of digital skills is one of the significant fields of interest for Google, and they're proud to be able to support IRIM and their programs, which remove the barriers of learning digital skills. 

Nenad Bakić, IRIM founder and a well-known Croatian businessman and philanthropist, highlighted that the citizens showed a lot of interest in the new digital content, which was provided in their local libraries. That interest was not only by the younger generation; the older citizens that visit the libraries, as hubs of learning and culture, also wanted to see the new technologies. During the project, IRIM organized 83 workshops, educating almost 400 librarians to work with the public on those new technologies. 1512 free workshops were held in the libraries all over Croatia, with over 13 thousand people participating. Two librarians and an advanced user of the technology provided through this project were also present at the promotion and spoke about their experiences. The new project, Digital Citizen 2.0 will further support the transformation of the public libraries into digital centers for innovation and digital skills development in Croatia, Bosnia and Herzegovina and Kosovo. That will be achieved through the development of new educational material, increasing the number of libraries included, as well as through the donations of new equipment. 

Croatian Science and Education Minister Blaženka Divjak and the US Ambassador to Croatia, Robert Kohorst, showed their support for the co-operation between Google and Institute for Youth Innovation by attending the event. 

Google attempts to assist the Croatian companies to take advantage of the potentials of the digital world, so in 2016 they started an online Digital Skills learning platform as a part of their program Grow with Google. They partnered with the Croatian Chamber of Commerce, Algebra, and Croatian Employers Association to further the initiative, and that lead to over 150 workshops being held all over Croatia, with more than 15,000 people learning new skills through Grow with Google program. Find out more at https://digitalnagaraza.withgoogle.com/.

Nenad Bakić talked to Branko Podgornik from Novi list about the year he spent as the President of the board of Varteks.

Nenad Bakić, a prominent Croatian entrepreneur, probably had one of the hardest years of his life in 2019. He was the President of the board of Varteks, and has dedicated almost all of his energy to saving the company from failing, and it seems that he's succeeded. In the last couple of days of 2019, he was showered with truthful and touching messages of gratitude on social media. In them, the workers of the company with the hundred years of tradition thanked him for his hard work and efforts, as he invested his money and business know-how to save more than a thousand jobs, made sure people were paid on time and brought some new zest into a company that was sliding into the abyss.

He's been known as an innovative entrepreneur for two decades now, he started the "Moj Posao" website, started and financed the Institute for Youth Innovation in Croatia, and is a donator and investor in many companies in Croatia. For his extraordinary undertaking from last year in Varteks, he has received many thanks and acknowledgements, not just from the workers and citizens of Varaždin, but also from the members of the business community and the wider public. The company, in which Bakić managed to buy a 47 percent share, is gradually recovering from the years marked by acquired losses. The metamorphosis of the company is still not complete, but the worst is behind it.

After the successful operation of salvaging Varteks, Bakić has withdrawn from the position of the President of the board, which he held for a year. He was replaced by Tomislav Babić, who was the member of the board of the company. Bakić returns to the Supervisory Board, where he will continue to work to revitalise one of the highest quality textile companies in Croatia and the region and allow it to grow back to its old glory.

Bakić says that his entry into the company was an accident.

''Some ten years ago, as Varteks was going through one of many crises, then President of the board approached me and suggested I invested in their stocks. He was afraid of aggressive buyers, and he wanted some investment into the company.

As an investor, I followed the underrated stocks, which might have a very bad or a very good perspective. If your portfolio is wide enough, your good investments can cover some losses. That's how I became a small shareholder in Varteks. First I had 6 percent, then I kept buying on the market and got to 17 percent two years ago. It wasn't a significant investment for me, as the price of the stock was very low.''

Asked if he knew the situation within the company, Bakić replies that he wasn't interested in that then. The company was doing poorly, and in time he realised that over the last 13 years, the company's losses amounted to over 800 million kuna. In former Yugoslavia, Varteks was one of the biggest real estate owners, they had over 200 stores. In order to cover those losses, the real estate was constantly being sold.

In 2017, an English investment fund wanted to invest in Varteks and turn things around and make their business healthy again. In the last moment, that fund withdrew, and the Board repeated their call for investment, saying that they'd need between 20 and 40 million kuna in order to stabilise the company. Bakić decided to invest 20 million kuna at that point, as he was already an important minority shareholder, but he had a responsibility toward the company, to help turn it around.

After the investment, he saw that the situation was much worse than what the management was saying. It was almost destroyed, it had no capital, and no merchandise on the shelves. The fashion component, important for this industry, was neglected, as was the selling network. Work done for foreign partners led to losses. Right after he invested, it turned out that there wasn't even enough money to pay the workers and suppliers.  The banks wouldn't give Varteks any more loans, so Bakić had to provide his own money – during 2018 he loaned the company more than 30 million kuna on the short term, without interest. He still hopes he'll be able to have that money repaid someday.

Bakić says that they tried to work with the former management, but that wasn't working out very well, and the company was sinking even further. In early 2019, he personally took the position of the President of the board for a year, to try to turn things around. The difficult situation continued, as Varteks needed more capital, and the banks still refused to give loans. He wanted Varteks to start producing more, and not just work as subcontractors for foreign companies. But, the company needed more money to start that cycle, so he loaned more of his money in 2019, around 15 million kuna. The good news is that the latest loan was provided six months ago.

The situation with textile companies in Europe was very difficult, and some of the European companies managed to profit from the European Union funds. However, in the 2014-2020 period, those funds were unavailable to Varteks, as only small and medium companies in Croatia could be financed from the European Union funds. Bakić says that it was a wrong decision by the government because the big companies carry the progress, which then, in turn, helps the SMEs. That's how the Bulgarian, Polish or Portuguese textile industries managed to restore their capacities, but Croatia was not able to.

He recognised the tradition of a hundred years in Varteks and the quality of their products. However, over the past decade, even that tradition of quality had been slipping away – their fashion was not as attractive, and the quality of the materials was reduced.

International brands took the lead on the Croatian market, beating Varteks in sales up to ten times. Bakić's strategy was to radically increase the quality of the material for the clothes, bring back the top materials by Italian producers to create recognisable products, such as suits. The second prong of the strategy was to re-establish their fashion, and they hired Martina Vrdoljak to be their creative director. Fashion is changing with increasing speed, as the producers now need to create nine or ten collections per year. To be able to provide that rapid-fire exchange of collections, much of the production is returning to Europe, mostly to Turkey. They want to become a part of that trend.

They also keep providing clothes for the Croatian army and police, and many other clients. It's a marginally profitable operation, and isn't creating problems, so they haven't focused much on that.

The results of all those efforts are amazing. Their retail income will be increased by between 50 and 70 per cent, and the company will have positive results overall. All of that happened in the year when the company was basically clinically dead, of which Bakić was not aware when he became the CEO. Bakić is, however, still not ready to celebrate victory, as there are numerous risks ahead. He adds, though, that if this transformation of Varteks succeeds, if it's possible to save a company from such an uncompetitive industry that was on the brink of failure, then it proves that almost anything is possible in Croatia.

Bakić says that they're extremely active online, especially on social networks. They also opened an online store, and during November, 7 percent of Varteks' sales came through that webshop. That's a remarkable result. Many Croatian celebrities promoted their suits in their campaign "Imperfect men in perfect suits" etc.

They also bought an old bus and turned it into a fashion store, and it has been travelling around smaller towns in Croatia for nine months now. It's possible to try something on in the bus and buy it using your phone, and the size and colour you want will arrive to your address in just a couple of days. That's how they reach buyers in rural Croatia, and also promote the use of the internet for shopping. All of that shows that they've managed to restore faith in the Varteks brand. If this trend continues, they'll be back in the safe zone in 2020.

They've also changed many things within the company, as they hired some new managers and changed the managerial culture which then brought new, positive energy. Workers in the textile industry are never paid well enough; however, but in Varteks the employees don't work for minimum wage, as they get some bonuses. Those bonuses were increased in the last year, and the employees didn't even demand that raise. Bakić wants the employees of Varteks to work for more than minimum wage, as soon as that is possible and the company is profitable. He promised the workers that not one kuna of dividend will be given to the shareholders, as long as their salaries are that low.

Read more about doing business in Croatia in TCN's dedicated "Business" section.

May 8, 2019 - The Varaždin-based Croatian company Varteks has been producing dresses, coats, jackets and other clothing for specialized purposes, including uniforms for the Croatian Army and the police for 101 years.

Famous textile industry brand Varteks is getting a new lease of life after Nenad Bakić became the majority owner of the Varaždin clothing manufacturer last year. Bakić recently took over the position of the CEO in order to accelerate the business processes that should lead to the full recovery of the company. Workers have stopped leaving, after a long time the company is no longer closing its shops, and wages are being paid on time, reports Index.hr on April 12, 2019.

“We found Varteks in a situation in which it actually only pretended to be a corporation. Varteks is a company that was in the slow decay for 10 to 15 years, accumulating a loss of 800 million kuna in the last 12 years. In such a situation, substantive and fierce management is needed. Therefore, I am working to dynamise the company and turn it towards real life, instead of monitoring processes that do not serve any practical purpose. We have put workers and designers in focus, instead of corporate bureaucracy. Paško Vela is also a member of the management board. We are working to empower the people below us. We will bring in several more people, and I hope that by the end of the year we will stabilise the company and significantly accelerate the growth so that I can return to the supervisory board,” said Bakić.

In addition to its own clothing, Varteks is also producing clothes for some of the world's most famous brands, such as Hugo Boss, but now the focus is back on its own collections. They also produce special clothing, such as police and military uniforms.

“Sewing clothes for others is not a hugely profitable job, and it can even be a loss-making one. We are implementing changes in our brand and retail programme. We are dynamising the situation, putting in the centre our designs, our project constructors and factory workers. We are launching four new stores; we have outstanding results in retail, and we are already producing orders for the fall/winter collection. The number of coats produced will be 50 per cent higher. Varteks has a fantastic quality; however, it did not know how to present the quality it has. Now, apart from improving the design of the clothes, we will continue to increase its quality,” said Bakić.

Although wages in the textile industry are low, they have managed to start paying them on time, and the next goal is to increase them. They also want to attract workers from other textile companies. “With the recapitalisation and interest-free loans which I provide to the company, for the first time after a long while workers are getting paid on time. It is true that salaries are still low, but we have just concluded a collective bargaining process where we have agreed on better incentives for workers. Our goal is to increase salaries. The aim is to make more money, to pay back our debts and invest in productivity, and higher productivity means higher wages. Higher wages are the only way to keep workers and increase their numbers. We think that some other textile firms will soon cease to exist, so we want to increase the attractiveness of jobs in order to attract the workers from these companies. Varteks used to lose 15 workers a month, but now, in the last four months, we have had just a few departures,” said Bakić.

The financial situation in Varteks is not favourable even after recapitalisation. They have no support from banks, and Bakić is financing the company with interest-free loans. "We have a strong need for working capital. However, Croatian banks have given us a grand total of zero kuna of working capital. They operate as local branches of their owners, and they do not want to take any risk because they are doing fantastic business anyway. We have a framework to receive guarantees in the amount of a million euro, but in order to get it, we had to provide a million-euro deposit. It is crazy. Financing needs are solved by me providing interest-free loans to the firm. Since my financial power is not infinite, we are struggling to survive, but we have something working for us – the retail is doing great,” said Bakić.

Translated from Index.hr.

More news about Nenad Bakić can be found in the Business section.

The Junior Engineer Academy programme was presented today at the Zagreb Innovation Centre. This is a project developed in the collaboration of Deutsche Telekom Stiftung, the Institute for Youth Development and Innovativity (IRIM) and Croatian Telecom (HT), the leader of the STEM revolution in Croatia. A vital feature of the programme is to establish and maintain close links with companies and universities that provide students with an early insight into the world of engineering in all areas of technology and science, reports tportal.hr on March 26, 2019.

In the first phase of the project, the IRIM selected 15 vocational schools to participate in the project implementation, donated advanced technology and funds to schools, and provided mentors with training to enable them to transfer the knowledge to students and work with them in the process of converting creative ideas into solutions using the IoT technology.

The second phase involves connecting the selected schools with related educational institutions and the business sector. Throughout the process of creating solutions, the IRIM provides continuous mentoring by its experts. The ultimate goal is to establish permanent co-operation between the educational and business sectors, which will result in stronger and more productive links between educational institutions and the labour market.

One of the main goals of the activities of Croatian Telecom, including through the STEM literacy programmes, is to bring technology into every corner of Croatia and thus create equal opportunities for everyone, and education is the starting point for bringing about such changes in the society.

In partnership with the IRIM, Croatian Telecom has equipped 160 schools in the last two year, while about 130 mentors and more than 2000 students have attended educational programmes to be prepared for the future created by the technological revolution. Young creators are achieving significant successes in global competition in creating innovative IoT solutions. The latest such success is the achievement of Vukovar high-schoolers who won the first prize at the worldwide competition marking the anniversary of Arduino - the technology which Croatian Telecom offers to a growing number of schools in Croatia.

“Getting the STEM knowledge to everyone is essential for young people to learn how to use technology to find solutions. That is why, for the third year in a row, we have completely changed the approach to learning in schools, and we are the leader of the STEM revolution in Croatia. We are proud that young people today have the opportunity to implement their ideas using the latest technology. Successes such as the one achieved by the high-schoolers from Vukovar prove that we are moving in the right direction and encourage us to continue developing such programmes,” said the director of HT corporate communications Nina Išek Međugorac.

“We will not stop until all schools accept the challenge and become part of the HT educational programme because that is the only way to create generations that will lead our society forward. We want these creative individuals with the competences of the future to motivate the whole society to join the wave of change that will result in simpler and better lives," Išek Međugorac said.

"With this project, we want to expand IRIM activities and strengthen high schools by providing them with cutting-edge technology, financial donations and continuous support through professional mentoring. Through the establishment of the Junior Engineer Academy network in Croatia, we want to foster cooperation between the educational and business sectors as well as the development of competencies that will prepare the young for the future," said IRIM president Nenad Bakić.

More news about IRIM can be found in the Business section.

Translated from tportal.hr.

Here at Varteks, we can see the 50+ years of decay. We are now discarding supplies, including buttons that someone ordered and bought 20 years ago, said Nenad Bakić.

“Until recently, the chairman of the board drove with a driver in the official A8, and the minimum wage wasn't even paid to workers. I think that with a radical change in the business model we can get better quality and go a step further. The suits which we produce today are literally the best of the best quality-wise,” reports Express on March 16, 2019.

He then presented optimistic development plans. “Through our retail section, we will return brands to the Croatian market and soon present ourselves to the international market with modern products. As for employees, we are ready to accept any worker who wants to return. If some of the other companies here were to go bankrupt, we would be ready to reopen a second shift. These are the plans we are ready for, but we have not yet started them.”

You are involved in an experiment that is risky for several reasons. First, it is about the textile industry that is considered to be dead in this part of the world, and secondly, you have invested a lot of money. What brought you to that?

I'm a long-term, so-called “deep value” investor and, if necessary, an activist investor. I do not consider my investment in Varteks to be any different than, for example, in Valamar, which was a much more significant investment for me, or, for example, Lošinjska Plovidba. But the collapse of the Varteks business led to the destruction of value and ultimately required recapitalisation. Since there were no interested investors, and I had already become a large shareholder, I thought that the amount foreseen in the call for recapitalisation was sufficient to turn the trend around. It turned out that it was not enough. Then, as Varteks needed more money and was completely cut off from financial markets and banks, I had to start borrowing for salaries and other obligations, so my investment became larger. Of course, I did all this because I could see the potential. And I can still see it today, but it seems that the whole investment will be significantly more demanding. However, success isn't guaranteed since the textile and fashion industry is very demanding and our starting position is extremely tough. Unfortunately, we are also hitting some of the “mines” of parasitic structures that have spread into ministries at the highest of levels, people who “have Croatia” and constantly speak about “statehoodness.”

Many Croatian companies in this branch did not succeed. Have you analysed these cases?

I would say that Heruc was a typical Croatian transition real estate investment. I did not follow the DTR case. However, textile and fashion businesses are very demanding, given the low costs of global production and the dominance of global brands.

You said that this branch in Croatia would see even more difficult days ahead. Why do you think that?

The textile and fashion industries are not the same thing. The Croatian textile industry is not price competitive. On the one hand, there are global producers with a significantly cheaper labour force, and on the other hand European producers who have been able to upgrade their plants with EU funds and become more competitive. Our EU negotiators made a big mistake and determined that large companies can't get EU funds, only small and medium-sized ones. This was in accordance with their failed Marxist views about the “conflict of labour and capital.” Namely, why should you help companies with substantial capital, because that inevitably goes against the workers. The truth is precisely the opposite; the work is more valuable when there is capital. Thus, textile companies in Bulgaria and Poland have been upgraded, and their wages are higher, while our remaining companies cannot pay salaries. On the other hand, big companies help small ones. We have just saved a medium sized company, our partner in the textile industry. I think all textile companies will soon be unable to continue doing business. Rescue will be possible just for those who have their own brands and retail, and Varteks is uniquely positioned in this regard. I, therefore, expect the number of Croatian workers to start growing soon, but we have not yet considered importing foreign workers.

Your company has enormous inherited problems due to decades of decay. I suppose these problems are similar to those in many other businesses in Croatia. Can you describe them in more detail?

First, financial devastation – no working capital or investment funds, and a lot of accumulated liabilities. Second, technological backwardness. Third, managerial and cultural devastation – too few good people, although some of them are excellent, whom we have recognised as possible transformers. Fourth, misunderstanding of the market economy, in terms of brand positioning, pricing policy, client approach... Fifth, an outdated business model.

How will you solve them?

We have significantly updated the design of our major products, suits, to match the quality we produce for some of the world's leading brands, such as Hugo Boss. We have a very active webshop and marketing strategy focused on digital channels. We have lowered prices for some products to be cheaper than the competition. We are rapidly developing new products. We have started proving the quality of our products with our limited collections of suits and coats using the world's most delicate fabrics.

Varteks has recorded some 800 million kuna of losses in the last ten years. That is 80 million a year, a lot of money... How did they cover it?

Mostly by selling one of the most impressive real estate portfolios anyone had in Croatia. Just remember the department store at the main square in Zagreb.

How will you cope with the competition from Turkey, China and similar countries?

Let's look at production first. The question is what is competition. Almost all of the largest global brands produce in low-cost countries. Even we create some of the products that are not essential to us in Turkey. But, for example, Hugo Boss, which has its own large production in Turkey, still makes some of the key products in Croatia. The reasons are high quality and speed. Today, in fashion, there is the trend of quick changes to the collections and frequent updates, which means that production is often located as close to the place of consumption as possible. So, we have a chance to organise production with higher profitability. For now, we are doing very well in returning Varteks's market position in that segment, and I do not see why it would not continue.

You have announced that you need more workers. Is Varteks burdened with excessive administration and a shortage of workers in production and creative personnel in the broader sense?

We have a shortage of creative people, such as constructors and designers, but we also have too many people in the administration segment because some of them are not doing their jobs at the level people in production do. We will continue to look for improvements. Our key competencies are creators, strong sales and marketing staff, and above all, workers and managers in production. My heart will always be primarily with the workers in production, and I believe that everybody else who does not do their job correctly is actually stealing from their pockets.

Where will Varteks be positioned, in which segment of the market? What will be the ratio of the local market and exports?

In sewing for others, the emphasis is on exports. In fashion, we will first at least double the market share in Croatia and increase exports in parallel. We have just experimentally enabled the purchase via webshop in Slovenia, which will be followed by some other European Union countries. Of course, as soon as we see that a market has a demand, we start looking for local partners, as we have already done in Bosnia and Herzegovina. We will soon present a line of sports, outdoor clothing, with military quality and similar designs. I am sure it will be an export product as well. All in all, we will be positioned as a producer of high to very high-quality products at a medium price. In short, strictly market orientation, with maximum focus on the client.

You are demonstrating that it is possible to have the industry in Croatia. What would you do to make it better, easier, more efficient?

I do not know whether I am demonstrating that, I am only proving that it is worth trying. Among the measures, I would ask the media to ridicule all the pests, including some ministers, who are persistently imposing on the nation the ancient ideals of the "statehood" economy, for the sake of maximising their personal interests through networking with strange structures in the Croatian economy and society in general. I would order all the elements of public administration system to serve those who pay them. Can you believe that an assistant minister recently said to me, as an investor partner in Đuri Đaković, who saved the company that was supposed to be a Slavonian version of Uljanik: “You lost nice money on Petrokemija, and I would not sleep peacefully if I had shares of Đuro Đaković.” He did it at the moment when he tried to convince me that there should be a new “uhljeb” appointed as the CEO. Imagine how many seconds would such a person last in a normal country if he were to speak to an investor, let alone a partner, like that. The terror of these people who “have Croatia” must stop. I would reduce bureaucracy and taxes. Perhaps it looks like some things cannot be changed, but let me remind you that in the most challenging area of all, education, we have made a revolution with the Croatian Makers project and launched the most extensive such programme in the EU. Moreover, in one of our programmes, we are creating an avant-garde, large project in Croatia, Serbia, Bosnia and Kosovo, in partnership with Google, which is unthinkable in other segments. We have demonstrated that Croatia can be a leader.

What do you think about the plans for the salvation of Uljanik and 3. May shipyards? Does Croatia need the shipbuilding industry?

The question is what is “Croatia”. Is it a worker who should just this year pay 5,000 kuna, and maybe that 5,000 kuna is needed elsewhere? Or is it some politician, or perhaps some reseller of steel etc.?

Some say that Croatia is unprepared for significant reforms and it would be a good idea to start at least with the small ones. What do you think about this?

I do not believe in such defeatism. As a charity organisation, the IRIM has created a tsunami with its Croatian Makers movement and laid the foundations for a social revolution in the next 5-10 years. Of course, we should be doing marginal measures as well, but I do not agree with the abandonment of the larger ones.

How long can Croatia continue like this?

Forever. In addition to tourism, we also have remittances from overseas workers, which are now about two times higher than direct foreign investments. It is also necessary to add other parts of the so-called secondary incomes, such as pensions from abroad. Direct foreign investments will, however, increase, but towards rent activities, mostly tourism. So, we will have resources for endless maintenance on this trend. If we are satisfied with demographic, relative material and spiritual decline, we will have no problems with sustainability.

Ireland had about 3.9 million inhabitants in 2003 and Croatia had 4.67 million people. Today, Ireland has almost five million people, while Croatia has fallen to four. Can Croatia do something similar to Ireland?

Yes.

More news about Nenad Bakić can be found in the Business section.

Translated from Express (reported by Boris Rašeta).

The Varaždin-based Croatian company Varteks has been producing dresses, coats, jackets and other clothing for specialised purposes, including uniforms for the Croatian Army, the police and the like for 101 years now.

As Poslovni Dnevnik writes on the 23rd of January, 2019, in three production plants in a complex of red brick buildings in the centre of Varaždin, several hundred workers are working daily in one shift on quality garment collections. In Varaždin's Varteks, 24sata journalists were welcomed and hosted by Nenad Bakić, president of Varteks' administration. He took them through all three production facilities. That day, designers who came to Varteks presented Bakić and his associates the new women's collection - business elegance.

''First, we do prototypes of the clothing, then after consultations they go off for additional finishing should that be necessary. After that, we make a collector's sample, a hand-made version that is produced in a small number of copies. If there are no more changes to be made, we make and launch the product,'' explained Bakić. Currently, Varteks is launching its latest elegant collection made with younger people in mind, called Varteks Young.

''We can split production into several phases. Everything begins with the tailor, from the threading and onwards. There, the machine cutter does almost everything itself according to the instructions on the screen. After that, sewing begins. All the parts from the cutter are picked up and people connect them in smaller segments. Then everything is shifted into the assembly, the middle part of production, where some segments are assembled and come to the end with finishing and the final ironing. After that, what's most important to us is quality control. If everything is fine, the goods are sent to the warehouse and are made ready for shipping, to our stores or to our customers,'' explained Miljenko Vidaček, production manager at Varteks. He adds that it takes about four hours to make a suit.

Varteks produces a very wide range of merchandise, its production manager emphasises the fact that Varteks is among the most flexible companies in this part of Europe as a whole.

''We were coming to the end, pre-bankruptcy. We're incredibly grateful to Mr. Bakić for the fact that we're still here,'' Varteks' grateful employees conclude.

For more information on Croatian companies, products and services, as well as doing business in Croatia and the overall business and investment climate, follow our dedicated business page.

November 21, 2018. Some well-deserved international recognition for leading Croatian entrepreneur Nenad Bakic for his efforts to improve education and opportunity in Croatia.

It is always nice to see international recognition from some of the world's most respected media, where Croatian excellence and initiative ranks among its peers on the world stage. 

One of Croatia's most active entrepreneurs, who divides his time between running several successful enterprises and trying to improve accessibility and options in the way computers and technology are taught in Croatian schools in this digital age, has been recognised for his considerable efforts in this year's list from the Financial Times, Europe's 100 Digital Champions. Here is what they had to say about Bakic: 

Leading individuals

These men and women are helping to promote digital transformation in Europe as leaders and influencers, both behind the scenes and in the public eye

• Nenad Bakic Mathematician turned social entrepreneur,

Nenad Bakic is trying to change the way computing and technology are taught in Croatian schools.

Bakic, who made his money from founding a series of online job sites, started by donating 25,000 microcomputers and robotics kits to more than 1,000 primary schools. This first part of the project was partially supported by a crowdfunding campaign. He later expanded the programme, with the backing of Croatia’s ministry of science and education, to every school in the country, delivering some 45,000 microcomputers.

Read more in the FT.

Nenad Bakic spoke at last week's G2.4 diaspora conference in Zagreb in what was arguably the presentation of the entire conference. In it, Bakic showed where Croatia is today, and the hope he is providing for the future for Croatia's younger generation through education and his Croatian Makers project. Here is a report on Bakic's presentation - a stunning snapshot of the realities of life in the modern Croatia. 

To learn more about Croatian Makers, visit the official website.