Actions

Bjelovar Varaždin Virovitica Koprivnica - development agency north

From Municipal Cooperation

Bjelovar Varaždin Virovitica Koprivnica - development agency north
Service Areas: Socio-Economic Development
Country: Croatia
Municipalities: Bjelovar, Koprivnica, Varaždin, Virovitica
Contact persons: Andrija Petrović, Marin Šipek
Legal form: Commercial company
Loading map...
Coordinates: 45° 53' 55" N, 16° 50' 32" E

Description of the problem/need for IMC

In recent years, local economic development (LED) has become one of the most dynamic and complex spheres of local self-government in Croatia. Municipalities play an important role in planning the overall economic development of their territories, developing projects to stimulate economic activities and supporting entrepreneurship initiatives. There is an increasing amount of central state budget and EU funds to support LED initiatives.

On the other hand, the internal capacities of most of the municipalities are too weak for LED planning, for applying to available funds and for implementing and managing LED projects. In most cases, they use external consulting assistance on an ad hoc basis, which is expensive and does not provide for consistent and systematic planning, implementation and monitoring of development projects.


The Development Agency North (DAN) was established to address the need for continuous professional support in the development, implementation and coordination of economic development activities in four major towns of north-west Croatia and thus contribute to the overall economic development of the entire region.

Description of the IMC practice

DAN, a legal entity with the status of trade company, was established in 2004 on the basis of a contract between three municipalities (Bjelovar, Varaždin and Virovitica) and one municipal trade company (Koprivnički poduzetnik, owned by the City of Koprivnica). One of the founders of the company, Međimurska County, withdrew from the company in 2008. The activities of DAN include:

  • Attracting direct foreign investments
  • Establishing and managing entrepreneurship zones
  • Establishing regional and international networks of technology parks and business incubators
  • Establishing regional and international networks of higher education institutions
  • Providing vocational training and life-long learning
  • Preparing proposals for financing from EU funds
  • Providing coordination and assistance in applying for EU funds
  • Managing EU-funded projects.

The total population of the municipalities owning the company is over 140,000 inhabitants; yet company activities are aimed at economic development of the larger region of north-west Croatia, which covers the territory of four counties and includes 92 municipalities with a total population of over 500,000 inhabitants.

The company operates as an independent legal entity in accordance with the Law on Trade Companies. The total basic capital of the company is HRK5,000,000.00 (approximately EUR700,000), shared in equal parts between the founders of the company. According to the contract establishing DAN, the founders are obligated to pay their share of the basic capital in a five-year period (25 percent in 2005; 20 percent in 2006, 2007 and 2009; and 15 percent in 2009).

The company has become fully self-sustainable: approximately half of its activities are commercial consulting services offered on the regular market, while the other consulting services are provided to founders (i.e. municipalities) at no charge.

The company employs 14 professionals in three branch offices (Varaždin, Bjelovar, Virovitica), who are not considered municipal employees. In addition, there are three external associates employed on a part-time basis.

The activities of DAN are divided into the following sectors:

  • Foreign Direct Investment (FDI) (promotion and attraction of investments)
  • Human Resources (high education and life-long learning)
  • Technology Parks and Incubators
  • Regional Development and EU Funds (application for available domestic and EU funds).

DAN’s work is supervised by the Assembly (Skupština) and the Management Board (Uprava društva).

The Assembly has five members and consists of the mayors of the four towns and a county preference (who may also designate officials to represent them). It meets at least once a year, approves the annual reports, plans and programmes, and appoints the President and the members of the Management Board.


Municipality
Percentage of shares
Percentage of votes
Bjelovar
20.00
20.00
Koprivnica
20.00
20.00
Varaždin
20.00
20.00
Virovitica
20.00
20.00
Međimurska County
20.00
20.00
TOTAL

The Management Board, consisting of five members, is responsible for defining the company’s business policy and preparing plans and programmes to implement it. One of directors is the President of the Management Board, who is responsible for the overall operations of the company, including decision making and administration. He or she is the legal representative of the company.

Establishment of the IMC practice

In 2004, the Mayors of the towns of Varaždin and Koprivnica initiated the first steps towards the establishment of DAN. They were joined later by the mayors of the towns of Virovitica and Bjelovar and the County Prefect of Međimurska County. By the end of 2004, the draft Cooperation Agreement was developed and then adopted by the legal bodies (councils) of all the founding institutions, which included three towns, Bjelovar, Varaždin and Virovitica, one company (Koprivnički poduzetnik, whose owner is the City of Koprvnica) and one county (Međimurska County). At the end of 2004, the Agreement was signed and at the beginning of 2005, the company was registered at the Commercial Court in Varaždin and started its operations.

The technical and administrative tasks concerning the establishment of DAN (preparation of documentation and drafting of legal documents) were mostly carried out by the administration of the City of Varaždin).

Benefits and shortcoming of the IMC practice

The activities of DAN show that the partner municipalities have established an efficient and professional company, which is an important catalyst for economic development.

A special feature of DAN, compared to similar IMC examples, is its self-sustainability. In 2006–2008, DAN developed and implemented tens of projects financed from various sources (CADSES, PHARE, CARDS, IPA, SAPARD, World Bank, the Croatian Bank for Reconstruction and Development, and various Croatian ministries), totalling over HRK70,000,000.00 (approximately EUR10,000,000.00). To date, DAN has generated its own earnings of over HRK6,200,000.00 (approximately EUR900,000.00) from its services provided on the market, which covers its operating costs (salaries, equipment and operating costs) and set-up costs for new activities. At the same time, the value of the services provided free of charge to municipalities-owners of the company already exceeds their initial investments by more than ten times, which is an obvious benefit for all the municipalities involved.

It should be noted, however, that, despite being one of the founders of DAN, almost immediately after its establishment, Međimurska County established its own development agency (REDEA), and did not provide support to DAN. Formally, the County withdrew from the company in July 2008, and legal issues such as the redistribution of ownership and management shares are being resolved.

Future plans for the development of the IMC practice

At the moment, there are no plans for expanding theIMC practice to new municipalities or for changing the organizational model of DAN.

Main lessons learned on how to establish IMC and make it a success

The success of the IMC practice is primarily based on the awareness of the municipalities that there is need to ensure continuous professional support for their economic development through self-sustainable professional organization of their ownership, and their willingness to participate in sharing the initial set-up costs of the company.

The DAN practice is well known in Croatia, and there are ongoing attempts to establish similar practices in other regions of the country. Several regional development agencies are already established, but mostly at the county level. However, the municipalities lack the specific know-how needed for the establishing companies for economic development. The relevant central state ministries and local self-government associations could support the replication of this IMC practice by disseminating information and providing education.

Readiness to support other municipalities to establish IMC

The representatives of the municipalities and the employees of DAN are open to participating in information events to promote their practice and to offering their professional support and advice whenever necessary.

Acknowledgment

The information about this practice was collected and presented by Marco Kovacic.