May 24, 2007 / 7:11 AM / 10 years ago

Business climate stifles Croatia's golf plans

BRIJUNI, Croatia (Reuters) - Europe's rich, famous and noble played golf on a spectacular course on these northern Adriatic islands in the 1930s. So say the yellowed newspaper clippings in a local hotel.

But after World War II, Yugoslavia's communist leader Tito turned the islands of Brijuni into an exclusive summer residence, populating them with exotic animals donated by Third World leaders. Golf declined steadily over the next 50 years.

Now the government of Croatia, which became independent in 1991, has restored the course to its former splendor and is trying to attract private investors to build dozens more courses on its Adriatic coast.

But despite the government's efforts to help foreign investors cut through red tape, persistent problems and uncertainty have plagued potential golf investments, indicative of a stifling business climate.

"After eight years of talking to three governments and five tourism ministers about our golf project, we now have all the papers," said Drazen Ladic, set to become one of the first private investors to build a golf course in the northern Adriatic.

"But I really don't know if I could recommend this to any serious foreign investor," he said.

This month, the state investment promotion agency APIU printed a guide to help foreign investors cut through the red tape and complex property ownership that have deterred investors in the past.

And it organized a golf investment conference at Brijuni, bringing together state officials, golf experts and potential investors, where APIU's head, Slobodan Mikac, said the agency was on a new drive to change bad perceptions.

For a start, he said the agency would focus on a few potential golf sites, collect all the paperwork and permits and then call an international tender for potential investors.

"As soon as the first courses are built, investors will become much more interested. They will realize Croatia is a country of law and order, where you no longer have to waste years and years before you can start building," he told Reuters.

He said the ultimate aim was to improve the former Yugoslav republic's tourism -- which generates some 6 billion euros or almost 20 percent of gross domestic product a year -- by attracting wealthier guests to play golf year-round, not just in the summer.

Croatia now has only one 18-hole course, at Brijuni. Austria has 147, according to European Golf Association data, and earns about 2.7 billion euros per year from golf.

"Not having golf is a big drawback. Right now, Croatia is embarrassingly low, at the bottom of European countries," said Marnix Von Bartheld of KPMG Travel, Leisure and Tourism.

He said the country could boost its share in Europe's golf revenues, which is currently zero, to around 3 percent by 2020, if at least a dozen courses are built.

Ladic said two or three golf courses, worth some 100 million euros each, would not turn Croatia into a golf destination overnight. "That would take investment of a few billion euros," he said.

Sixty Potential Sites

Croatia's new national construction plan has identified some 60 potential golf course sites, most of them along the touristy Adriatic coast and particularly the northern Istrian peninsula.

However, Ladic said many locations had been randomly chosen and complicated by muddled ownership that can seriously slow down potential projects.

Some 10 locations have been identified on the Istrian peninsula at the head of the Adriatic and already have potential investors, said Istrian county prefect Ivan Jakovcic.

"We have persuaded local environmental groups that golf courses are necessary and that they will be respecting our landscape, architecture, local traditions," Jakovcic said.

Robert Goff of Aucris investors, who has spent almost a decade in the region, knows there are many risk factors to consider, including the possibility that government, parliament or local administration have a last-minute change of heart.

"There needs to be a concerted decision by the government as to whether they really see golf courses as a benefit to support tourism, to reduce bureaucratic risk to investors." he said.

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