Heavy industries struggle in Croatia, a country in transition

By Eugene Brcic, Associated Press, Boston Globe, 19 January 2003, 14:04

ZAGREB, Croatia (AP) Roko Nikolic's temper flickered on and off like the gas torch he had wielded since he was a teenager at Croatia's oldest and largest iron and steel foundry.

One moment he was calm, praising Sisak Ironworks as the pride of the former Yugoslavia's metals industry. The next he was in a rage, fuming over mass layoffs at the now-foundering plant, which threaten to cripple an entire city in the heart of Croatia.

“Nobody gives a damn about the working class anymore,” the stocky welder grumbled.

Nikolic's sense of helplessness captures the tough transition facing Croatia's once-proud heavy industries.

About half a million Croats used to work in shipbuilding, textiles and mining before the country slid into war with rebel Serbs, who opposed Croatia's independence from the old Yugoslav federation in 1991. The metal industry alone used to provide a living for nearly 200,000 workers.

Now, nationwide, only about 290,000 workers have managed to hold down jobs on sooty assembly lines. Of the 65,000 employed in metals, nearly half receive irregular wages.

“War and errant politics collaborated to ruin the metal industry,” trade union leader Ivo Marjanovic said, accusing the government of abandoning workers instead of devising a retraining program or other safety nets.

“We drew the short end of the stick in the state's development strategy as it turned toward tourism and other sectors,” Marjanovic said, demanding intervention and equal assistance.

The head of the industrial wing of the Croatian Chamber of Commerce, Miljenko Babic, said there are no easy answers.

“The time has come to adapt to the harsh realities of the world economy and the stresses globalization brings,” Babic said. He contends there was a lack of investment during the war and that production methods have become outdated, too costly and basically in poor shape for international competition.

Michael Glazer, the head of Auctor, a finance and investment consulting agency based in the capital, Zagreb, said the problem is not a challenge facing only impoverished or former socialist countries.

“The post-industrial era is a global affliction, and no matter how much government's would like to rescue crumbling industries, sometimes it's wiser if they don’t,” he said.

Analysts liken the Croatian government's experience in trying to bail out drowning companies in the past to flushing money down a bottomless well. In most cases, several thousand disgruntled workers were temporarily satisfied with payoffs, while only the odd firm or two was restructured successfully enough to survive in a liberalized arena.

“Workers are suddenly awakening to find their jobs obsolete or transformed beyond recognition by technology exploding completely outside their field of vision,” Glazer said.

“It's not always a question of money and resources. In transition countries, it can often entail rewiring the whole mentality of workers.”

Glazer was referring to remnants from almost half a century of planned economics lingering in the mindset of workers in ex-communist countries.

Communism made a point of securing each individual a job and free health care as an inalienable right. Like their counterparts in the Czech Republic, Hungary, Slovenia and other transition countries, Croatian workers often spent their whole lives in one town, plying their trade for the same company.

It was a system that rewarded the programmed worker who plodded along in a conformist fashion under strict and clear guidelines.

“It's an enormous psychological shock crossing from a planned economy to a market economy, particularly for blue collar workers,” said Goran Saravanja, a senior economist at CAIB, an international investment bank.

“You can just imagine the additional trauma if the concept of changing your job or losing your job was a virtually nonexistent phenomenon,” he added.

New technology demands a new kind of worker, one who is itching for greater responsibility and a chance to rise above his peers through newly acquired talents and skills.

While studies show that younger workers tend to find it easier to accept change and often embrace it enthusiastically, those in their middle-age, like the average worker at Sisak Ironworks, often try to ward it off. Last month, police clashed with irate workers who tried to block a main bridge leading from Sisak to the capital, demanding that the government step in to save their jobs.

In 2002, an Austro-Russian consortium bought the plant located some 40 miles southeast of Zagreb, promising massive restructuring without any layoffs. However, the enterprise went bust after 10 months and the investors pulled out after losing some $10 million, throwing almost 2,000 workers into the street.

The government is currently examining new bids from investors. Media reports claim interested parties included Swiss steel-trading giant Duferco, Italy's ZinchItalia, Austria's Olax and Slovakia's Podbrezova.

Although union leaders have threatened to stage mass protests if the government agrees to any deals scaling down the labor force, Deputy Prime Minister Slavko Linic has vowed the government will not cave in to pressure from the street.

“Sisak Ironworks is not the only Croatian firm in dire straits,” Linic said. “We will not be bullied into breathing artificial life into the plant and then look the other way with a host of other firms beset by identical problems.”