Mine Action Program
1. Cluster Profile
The Mine Action Program includes all activities aimed at alleviating the consequences and problems caused by the mine-affected areas. It refers to “safety, economy, reconstruction and integration of war-affected areas, ecology and protection from natural disasters” (CROMAC, n.d.). Croatia started facing the mine problem in the beginning of the Croatian War of Independence (Homeland War [1991–1995]), as one of the worst consequences of warfare. Mine-affected areas cause a wide range of economic, developmental, ecological, and social disruptions, especially security issues to the population living close to the mine-affected areas.
By adopting the Law on Demining in 1996 and by establishing the Croatian Mine Action Centre (CROMAC) in 1998, Croatia confirmed strong determination to tackle mine and unexploded ordnance (UXO) problems in its territory after the war. In addition, it has stated commitment to fulfill the obligations from the Ottawa Convention1 accession in 1998 and to provide permanent and stable sources of funding for humanitarian demining from the state budget, the World Bank loans, and the legal entities in Croatia (Croatian Parliament 2009).
The Mine Action Program in Croatia consists of the following:
- Humanitarian demining operations covering the activities resulting in removal of mines and UXOs.
- Mine risk education with the aim to increase awareness of dangers of mines and UXOs by issuing information for general public, conducting formal and informal education programs, and promoting safer behavior of the people living close to the mine-affected areas.
- Victim assistance, rehabilitation, and reintegration (any assistance and support to victims with the aim to reduce immediate and long-term health and psychological trauma). In this context, a victim is also a person who depended on the person involved in the incident.
- Destruction of stockpiles of mines, mediation, and advocacy on prohibition of use of antipersonnel mines. In December 1997, Croatia signed the Ottawa Convention that was ratified by the Croatian Parliament on April 24, 1998. In 2002, Croatia had fulfilled its obligations to destroy stockpiles of antipersonnel mines, prohibiting its production, sale, and use, as well as political advocacy on an international level against the use of antipersonnel mines (Croatian Parliament 2009).
In the scope of this project, 21 stakeholders of the Mine Action Program STPA have been interviewed. During the interviews, unofficial information was received that Croatia will officially postpone the target for removal of the mine danger from the entire territory of Croatia for two to five years (the original plan according to the National Mine Action Program was 2019 (Croatian Parliament 2009).
1.1.1. History and Significance of the Industry in Croatia
The most important segment of the Mine Action Program in Croatia is humanitarian demining and removal of mines and UXOs. Regarding the methods and the subjects performing demining activities, the Mine Action Program in Croatia can be divided into three main periods:
- The first period refers to the war years (1991–1995) when the focus of demining activities was on combat operations and creating a safer environment for civilian population movements in mine-affected areas where demining operations were conducted by the Croatian Army, Croatian Police, and the Civil Protection Unit.
- The second period refers to the period from the adoption of the Law on Demining (March 1996) until the establishment of CROMAC in 1998. In this period, the Ministry of the Interior was responsible for planning the demining operations, and demining activities were conducted by the state-owned enterprise (SOE) AKD Mungos Ltd. In this period, the United Nations Mine Action Centre (UNMAC) was established (August 1996), and it played an important role in not only raising demining funds but also collecting data on mine contamination from all parties involved in war operations on the territory of Croatia. In this period, the Government of the Republic of Croatia founded the Committee for Demining Issues as an advisory body for management and improvement of the demining system. In December 1997, Croatia signed the Ottawa Convention.
- The third period started with the establishment of CROMAC, when a market model was introduced into the demining system and all the activities relating to management and coordination of the demining process in Croatia were taken over by CROMAC. In this period, significant funds have been invested into demining capacities, and many private companies have been founded, which resulted in considerably bigger areas being demined ever since (Croatian Parliament 2009).
Since the beginning of demining operations in Croatia, the main issue has been the question of the definition of mine-suspected area (MSA). Considering that the staff and technical capacities were nonexistent, primary definitions mainly used mathematical assessment methods, so the first UNMAC assessments estimated around 13,000 km2 of MSA. After the establishment of CROMAC and by conducting general and technical examinations, the abovementioned areas, that is, their estimates, were considerably reduced to about 1,700 km2 in 2002 (Croatian Parliament 2009).
According to the latest information from October 2017, “the mine suspected area (MSA) on the territory of the Republic of Croatia amounts to around 418 km2 as a result of humanitarian demining activities.” The mine suspected area covers 9 counties and 60 local municipalities that are contaminated with mines and unexploded ordnances. It is assumed that MSA is contaminated with approximately 39.325 mines. Additionally, MSA is contaminated with a large number of unexploded ordnance (UXO), especially in the areas of intense combat operations during the Homeland War. The entire MSA on the territory of the Republic of Croatia is marked with more than 13,940 mine danger signs and warnings” (CROMAC 2017).
1.1.2. S3 and STPA
To transform the Croatian economy and increase its competitiveness, the Croatian government has adopted the S3 by concentrating knowledge resources and linking them to a limited number of priorities. The Mine Action Program STPA, under the Security thematic priority area in the Croatian S3, refers to “a specific market niche associated with the demining program that Croatia has been carrying out since the end of the Homeland War, and within which a remarkable level of professionalism and expertise has been reached in dealing with this growing problem in a global society, especially in the war affected areas. In Croatia, this specific segment is strongly supported through the activities of small and medium-sized enterprises, with a highly-developed level of their technological readiness and sophistication and the associated capacities (human and material)” (Government of the Republic of Croatia 2017).
The government’s S3 provides useful insight into the scope and focus of the Mine Action Program STPA. The strategy spans a varying set of activities and lays out a range of research and development (R&D) topics and key enabling technologies (KETs) that can be utilized to support private sector growth. Most notably, the strategy specifies a need for the following R&D topics:
- Development of mine and geo-information databases and methodologies (for example, advanced systems for real-time decision making based on geo-information databases and systems, development of e-learning)
- Optoelectronics (hyperspectral, thermal)
- Advanced production: products and solutions development in applying robotics in special ground/aerial platforms; unmanned systems integrating multi-sensor, hyperspectral, thermal survey for mine action and natural disasters
- Development of technological convergences in final products and services (for example, biotechnology and ICT, ICT and sensory and digital technologies, ICT applications and software solutions for the operation of air and land-based platforms for fighting natural disasters)
- Development of applications and measurement methods for natural disasters, multidisciplinary detection and border security capabilities, land control and observation systems, testing of new explosive materials, research on the application and equipment of new terrorist explosive devices and their efficient prevention in the counter-terrorism actions)
- Development of autonomous vehicles (underwater, land and air) for timely detection and neutralization of dangerous objects (Government of the Republic of Croatia 2016)
Additionally, R&D and innovation topics within the horizontal KETs and information and communication technology (ICT) themes are as follows:
- Development of ICT solutions for the establishment of a demining database and movements in the mine suspected areas using crowdsourcing tools
- Vehicle and person tracking in and close to the mine suspected areas
- Machine learning and computer vision in the mine action program
- KETs for satellite or unmanned surveillance (air, land, and sea)
- Unmanned vehicle management systems
- Advanced human-robotic interfaces
- GIS, geo-spatial analysis and geoprocessing, geostatistical analysis (Government of the Republic of Croatia 2016)
These topics will be important for achieving innovation in the sector and will be more thoroughly assessed in the next document in this series (Deliverable 11) in the context of how they can support access to more attractive segments. More immediately, the following sections take stock of how the Croatian industry is performing now—particularly in the perspective of GVC participation—and then map a set of relevant actors, agents, and organizations that represent the ‘cluster’ associated with this sector.
1.1.3. Regulatory Framework
The Mine Action Program STPA is one of the most regulated STPAs in the S3 of Croatia. This is primarily the case because of the dangerous nature of the humanitarian demining activities and strict prescribed procedures to protect lives of the people in the field. In this STPA, there is an international and national regulation framework.
126.96.36.199. International regulations
The Convention on the Prohibition of the Use, Stockpiling, Production, and Transfer of Anti-Personnel Mines and on their Destruction (1997) is the most known international convention in humanitarian demining and it represents “the international agreement that bans antipersonnel landmines. It is usually referred to as the Ottawa Convention or the Mine Ban Treaty” (UNODA, n.d.) Currently, 162 states have ratified or acceded to the treaty (United Nations Treaty Collection 2017).
Aside from the Ottawa Convention, the International Mine Action Standards (IMAS) “are the standards in force for all UN mine action operations. They were initially endorsed by the UN Inter-Agency Coordination Group on Mine Action on 26 September 2001.” (UN Inter-Agency Coordination Group 2001)
The Geneva International Centre for Humanitarian Demining (GICHD) “is an expert organization working to reduce the impact of mines, cluster munitions and other explosive hazards, in close partnership with mine action organizations and other human security actors.” Although, the GICHD does not directly represent an international regulation, in supporting the goals of mine action programs such as “saving lives, returning land to productive use and promoting development, GICHD represents a unique and international center of mine action expertise and knowledge” (GICHD, n.d.).
188.8.131.52. National Regulations
The national mine action regulation in Croatia consists of the law, the national mine action strategy, standard operating procedures (SOPs), and many ordinances that prescribe more detailed regulation and procedures.
The Law on Humanitarian Demining (Official Gazette No. 110/15) regulates humanitarian demining operations in Croatia. It covers the general rules, rights, and obligations of the entities included in demining operations. The law also covers the supervision and monitoring over humanitarian demining operations in Croatia (Croatian Parliament 2015).
The National Mine Action Program of the Republic of Croatia defines the plan and mine action objectives from 2009 to 2019. It covers the responsibilities of the main entities such as state administration bodies (Ministry of Foreign and European Affairs, Ministry of the Interior, Ministry of Defense [MOD]), local municipalities, CROMAC, and so on. Main objectives of the program are as follows:
- (a) Removing mine danger from the entire territory of Croatia until 2019
- (b) Maintaining sustainable system of marking the MSAs during the entire demining process
- (c) Providing education to the entire population living or working close to the MSAs
- (d) Continuance of providing care and rehabilitation including psychosocial rehabilitation and economic reintegration to all mine victims
- (e) Promotion and positioning of the Croatian mine action system within the international community (Croatian Parliament 2009)
As mentioned earlier, during the interviews with the stakeholders of the Mine Action Program STPA, unofficial information has been received that Croatia will officially postpone the target for removal of the mine danger from the entire territory of Croatia for two to five years. The original plan according to the National Mine Action Program was 2019.
In line with the IMAS, CROMAC has prescribed SOPs that represent a set of strict determined operating procedures in humanitarian demining in Croatia. Among other, it covers project planning and project documentation development, eligibility assessment of the authorized legal entities for conducting humanitarian demining operations, quality assurance and quality control of demining operations, and so on (CROMAC, n.d.).
Other regulations include a number of ordinances, out of which the ordinance on the procedure of performing demining, quality control, general and technical survey, and marking MSAs (Official Gazette No. 45/2016, 27/2017) is the most comprehensive one (Ministry of the Interior 2016, 2017).
2. National Supply Profile
The definition of the Croatian Mine Action Program STPA as defined in Croatia’s S3 relies upon the sector definitions used in international best practice and considers sector specifics related to the humanitarian demining industry. In that respect, for this analysis, the Croatian Mine Action Program STPA has been defined through a list of representative companies.2 The next section will cover companies’ analysis in more detail.
Methodology. Financial analysis of the Mine Action Program STPA in this report was conducted by using the Bisnode Portfolio Intelligence database. The database offers financial data on Croatian companies gathered through collection of data from mandatory regulatory fillings of Croatian companies submitted yearly to FINA (the Croatian Financial Agency, the payment and financial intermediary services provider) through a standardized GFI-POD form.3 Figures showed in Sections 3, 4, and 5, unless otherwise stated, were created by analysis of financial information of companies operating within the NACE4 sectors presented in Table 1. The database was accessed on October 23, 2017, and the companies that were excluded from the analysis were with(a) insolvent, (b) bankrupted, or (c) erased status.
The Mine Action Program STPA is difficult to define through NACE or Harmonized System (HS) codes. Most of the companies operating within the industry often operate across multiple sectors and NACE and HS codes. However, 85 percent of the demining service providers analyzed in this report are registered under the NACE code ‘E39.00 Remediation activities and other waste management services’. The following table provides the entire list of NACE codes identified in the scope of the Mine Action Program STPA in Croatia.
Table 2: Scope of the Mine Action Program STPA (NACE Codes)
2.1. Product development and Exports
The core companies within the Mine Action Program STPA are providing humanitarian demining services and are using technologies and equipment for manual mine detection and machinery for mechanical surface preparation. The technologies and equipment used in manual mine detection, such as metal detectors or ground penetration radar technologies, are usually imported from international suppliers. On the contrary, demining machinery and technology are being produced in Croatia by DOK-ING d.o.o, Đuro Đaković specijalna vozila d.d., and Istraživač d.o.o. The Croatian demining companies have the option to import machinery for mechanical surface preparation from abroad, buy it domestically, or even lease it from the local producers.
In terms of exports, DOK-ING and Duro Dakovic account for most of Croatia’s exports in the mine action industry. Most of the humanitarian demining companies have been providing their services only in Croatia and are not export oriented. DOK-ING and Duro Dakovic manufacture demining equipment, such as tracked and remote-controlled demining vehicles, and these are exported. Figure 2 shows the value of exports (and total revenues) in 2014-2016 for those two companies, and indicate total exports of about EUR 30 million by both companies combined. DOK-ING’s demining manufactures are noticeably more export-oriented than Duro Dakovic: approximately 90% of DOK-ING’s revenues are from exports.
3. Industry Functioning
According to the Law on Humanitarian Demining (Official Gazette No. 110/15), when performing demining operations in MSAs, the following methods can be used:
- Machinery for surface preparation
By using a combination of these methods, authorized legal entities for humanitarian demining activities (demining service providers) must achieve clearance of the areas of all mines, UXOs, and their parts. The way of combination of the methods used is prescribed by the ordinance on the procedure of performing demining, quality control, general and technical survey and marking mine suspected area (Official Gazette No. 45/2016, 27/2017).
CROMAC is a legal entity with public authorities established in 1998. Since the establishment, “Croatia has developed its own model by implementing internationally recognized guidelines and technologies. Nowadays, according to esteemed experts in the field, it is one of the best models in humanitarian demining. The Demining Information System was developed for all the complex procedures in humanitarian demining, the implementation of public procurement of demining operations, as well as the quality control and technical inspection of demining operations” (CROMAC, n.d.). CROMAC, among other activities, is responsible for the following:
- Developing proposals for the Humanitarian Demining Plans and National Mine Action Plan
- Developing project proposals and additional mine search and demining projects
- Implementation of public procurement of demining operations
- Conducting general and technical surveys
- Performing demining control inspection and quality assurance (CROMAC, n.d.)
3.1. Economic Geography
3.1.1. Number of Firms
For this assessment of the Mine Action Program STPA in Croatia, 65 companies have been identified in this STPA in Croatia.6 The largest number of firms represent the category of demining service providers (40), and other subcategories include personal protective equipment (PPE) producers, information technology (IT) companies, communication companies, geo mapping companies, demining machine producers, and distributors.
Source: World Bank and CIRAZ teams.
3.1.2. Clustering of Firms
As seen on the map in Figure 4, most of the private companies in the Mine Action Program STPA are based in the central, northern, and eastern part of the country. Supporting institutions and science and research centers are centered around Zagreb, Split, and Sisak where CROMAC is based. A more detailed and thorough analysis of the stakeholders will be presented in the following sections.
3.2. Profitability Analysis
3.2.1. Assets, Debt, and Revenue
The following analysis of the Mine Action Program STPA companies covers the most important categories for financial evaluation. It covers data on assets, equity, total revenues, net profit or loss for the period, gross margins, and employees. Every subcategory within the STPA (demining service providers, PPE, IT companies, geo mapping companies, communication companies, distributors, demining machine producers) is separately analyzed. In addition, the demining service providers are analyzed more thoroughly as they represent the key subcategory within the STPA, and the Compound Annual Growth Rate (2014–2016) of the major indicators is shown in Figure 5.
The following analysis will briefly asses the financial results of the major subcategories within the Mine Action Program STPA. The data in Table 3 and the following analysis consider financial results for 2016 and 2015 and therefore address recent data and short-term trends.
Demining service providers. As shown in Figure 5 and Table 2, demining service providers had a decline of 11.33 percent in total revenues in 2016 compared to 2015, but the revenues in 2014 were below the 2016 figure, so the subcategory’s CAGR (2014–2016) is positive by 2.05 percent. However, the net result was drastically lower in 2016 in comparison with 2015 and reached the total amount of only around EUR 1 million for the entire subcategory (40 firms) with an average net profit margin of only 2.63 percent.
PPE. PPE producers had a decline in all indicators in 2016 in comparison with 2015. The decline is particularly enormous in the net result, primarily coming from Borovo d.d., which had more than EUR 2.3 million loss in 2015 and 2016, but the good performance of Šestan Busch d.d. in 2015 of almost EUR 2 million of net profits held the subcategory in plus in 2015.
IT companies. IT firms have a peripheral and supporting role in the Mine Action Program STPA by providing IT solutions that had a good performance, which is common to the IT industry in Croatia in general. The growth in almost all indicators was above 10 percent, which is an excellent result.
Geo mapping companies. The performance of the geo mapping companies was disappointing and all analyzed indicators in 2016 were drastically lower in comparison with 2015. For example, revenues decreased by 33.02 percent. One of the most known companies in the field, Geofoto d.o.o., is blocked and the long-term sustainability of the other firms in the subcategory is in danger if this trend continues.
Communication companies. The communication companies’ results in 2016 were dominated by the large Transmitters and Communications d.o.o. company that had an excellent financial result of more than EUR 4.7 million net profits and annulled the loss of PCE Marine Electronic Center Ltd (PCE d.o.o.) in Split.
Distributors. Distributors that are selling the humanitarian demining equipment grew in all indicators in 2016 and an especially remarkable result is the net profit growth of more than 150 percent. However, the base number was quite modest in 2015 and that is the reason why the total profit of EUR 116,542.05 in 2016 shows a huge growth rate in comparison with 2015.
Demining machine producers. Demining machine producers are represented by probably the most esteemed company in the Mine Action Program STPA DOK-ING d.o.o. and Đuro Đaković specijalna vozila d.d. The revenue growth in 2016 was impressive primarily because of DOK-ING d.o.o.’s growth in revenues from EUR 10.4 million in 2015 to EUR 26.6 million in 2016. In addition, Đuro Đaković specijalna vozila d.d. also had a growth in revenues from EUR 18 million in 2015 to EUR 21.5 million in 2016. The net result of the subcategory was positive after a huge loss in 2015.
The demining service providers as the key subcategory in the STPA employed 814 workers and demining machine producers employed 550 workers in 2016, which amounts to 1,364 for these two subcategories. However, if all subcategories in this analysis are included, the total number of employees in the Mine Action Program STPA is 3,863 in 2016 (65 companies), which is an increase from 3,832 in 2015. The largest employers in this analysis are the PPE companies with the total number of 1,555 workers, out of which 1,073 are employed by only two companies, Borovo d.d. and Galeb d.o.o. The detailed analysis of employment by subcategories in the STPA is shown in Figure 6 and the analysis of the number of employees in the demining service providers firms (2014–2016) is shown in Figure 7.
Figure 8 represents a more detailed analysis in the three-year period from 2014 to 2016. As shown in the graph, demining service providers had the highest average net profit margin result in 2015 with 6.3 percent, followed by the decline to 2.63 percent in 2016. Demining machine producers achieved positive results in 2014 and 2016 but had a huge loss in 2015 driven by the DOK-ING d.o.o.’s loss of more than EUR 4 million in that year. The highest net profit margin in 2016 was achieved by the communications companies, primarily driven by the result of Transmitters and Communications d.o.o. PPE producers, after positive results in 2014 and 2015, achieved negative average result in 2016 because of Borovo d.d.’s huge loss of more than EUR 2.3. million both in 2015 and 2016. However, an excellent result of Šestan Busch d.o.o. managed to cover the loss in 2015, but the net result of the company was quite modest in 2016 in comparison with previous performance and therefore the overall subcategory performance was negative.
In Figure 9, profitability of the demining service providers is analyzed. According to the data for 2016, more than 55 percent of the firms are either in loss or achieve minimal profit margins of up to 3 percent. Only 43 percent of the firms achieve profit margins of above 3 percent.
Net Profit Margin of Demining Service Providers (2016)
3.3. Productivity and Innovation
Data on productivity of the core companies in the Mine Action Program STPA can be approximated by analyzing revenues per employee ratio. Looking at the last three years, the overall productivity plummeted in 2015 mainly caused by the 42.14 percent year-on-year decline in revenues by the demining machine producers, driven by DOK-ING d.o.o.’s crisis in 2015. However, in 2016, they managed to recover and achieve better productivity results than in 2014. Demining service providers are dependent on the amount of work and tenders issued, and their results on productivity are therefore often influenced by these factors.
Figure 9: Productivity of the Demining Service Providers and Demining Machine Producers (Revenues per Employee) 2014–2016 (EUR)
According to the European Innovation Scoreboard 2017, Croatia, with its innovation index, occupies 33rd place out of 37 ranked European countries. Croatia is labeled as the last in the category of ‘moderate innovators’ with 54.7 performance index (2016) in comparison with the European Union (EU) average (28 countries). Over time, performance has declined from 56.1 from 2010. The ranking also shows that Croatia occupies 27th place in the EU out of 28 member states. “Relative strengths of the innovation system are in Firm investments, Human resources, and Employment impacts. However, relative weaknesses are in Intellectual assets, Attractive research systems, and Innovators.” (European Commission 2017)
According to the analysis from the SCImago Journal & Country Rank, during 1996–2014, Croatian researchers published 83,516 citable documents in all scientific disciplines including Engineering, Environmental Science, and so on, ranking Croatia at 48th place out of 239 countries (Scimago Journal & Country Rank, n.d.).
The main reason for the weak innovation performance of the Croatian industry is “the lack of a systematic innovation policy, i.e. its inefficiency, and the complexity and fragmentation of the Croatian innovation system, which generally lacks better coordination and synergy of its various parts. A very important factor for this weaker innovation performance is the complete lack of innovation culture and consistent pursuit of all parts of the innovation system to create new, commercially viable products and services as well as inadequate cooperation between academia/research institutions, industry and public sector” (Government of the Republic of Croatia 2017). Because of this lack of coordination, support for investments in R&D, and focus on internal market, the industry lacks knowledge and capacity for those segments as well as know-how for R&D and export strategies. At the same time, policy makers failed to direct the existing available financing toward practical use of innovation, aimed at further commercialization, which is the crucial goal of every successful innovation. (Government of the Republic of Croatia 2017)
The innovation in the core companies in the humanitarian demining domain in Croatia is mainly present in the demining machine producers subcategory. For example, DOK-ING d.o.o. has been integrating its own innovations and innovative technologies in the past 25 years, and successful financial results and global exports are confirming their business excellence. “DOK-ING was actively engaged in demining activities and has gathered vast experience in different types of landmine clearance, on all types of terrain in the Republic of Croatia, as well as in the surrounding countries. This experience was the basis for designing and manufacturing the first remotely controlled demining systems, constructed exclusively for humanitarian demining. As those were upgraded, improved and enlarged, the company has been doing R&D projects with various international and domestic organizations, including Croatian Ministry of Science, Education and Brodarski institute, Faculty of Electrical Engineering and Computing of the University of Zagreb, and Geneva International Centre for Humanitarian Demining (GICHD)” (DOK-ING d.o.o., n.d.). Other machine producers have also been investing in demining machinery improvement.
It has also been noted that the Faculty of Faculty of Electrical Engineering and Computing Zagreb (FER) is conducting research in the humanitarian demining domain. The faculty researchers are innovating in the mine detection technologies’ improvements using metal detection systems, ground penetration radars, and so on. Research activities of the other Croatian faculties in the engineering, geology, and geodetic domain are also quite interesting for the humanitarian demining industry.
4. Cluster Figures: Market-Based Actors
When considering the cluster, it is important to look at all agents and actors operating in the sector. The sector consists of both market actors (firms) and supporting bodies and organizations. Market-based agents are displayed to the left in Figure 11, while the support bodies are cross-cutting across these. This chapter describes the market agents in the cluster, both the set of ‘core’ firms that are the focus of the STPA, and a number of other private firms that may be necessary to help move the industry into more attractive segments.
Figure 11: Mine Action Program STPA Cluster Map
4.1. Core Firms
4.1.1. Demining Service Providers
Demining service providers represent the core companies of the Mine Action Program STPA. These companies are a key part of the value chain in humanitarian demining and are responsible for MSA reduction and removal of the antipersonnel mines and UXOs from the affected areas. In the following tables, the top five demining service providers by revenue, profit margin, and number of employees are listed and analyzed.
Table 4: Top 5 Firms by Revenue, 2016 (EUR)
Table 5: Top 5 Firms by Profit Margin, 2016 (EUR)
Table 6: Top 5 Firms by the Number of Employees, 2016 (EUR)
As mentioned in the previous sections, the total number of demining service providers in 2016 is 40, and they employ 814 workers. During the interviews with the stakeholders in the industry, it was noted that 10 years ago there were around 25 firms with the similar number of employees. The newly established 15 firms are often owned by the same owners as the previously established ones, and as can be seen in the court registry,7 different legal entities are headquartered in the same address and have the same ownership structure. As told in the interviews, having a multilegal entity presence in the market allows the owners to be more flexible in the public tendering processes and helps them mitigate administrative obstacles.
Istraživač d.o.o. and Istraživač Benz d.o.o. (sister companies with the same owner and the same address) were among the most successful demining companies in 2016. As can be seen in the above tables, Istraživač Benz d.o.o. stands first by revenue, and Istraživač d.o.o. holds the fourth place. Additionally, Istraživač d.o.o. holds the second place by the profit margin and third place by the number of employees. Other notable firms are Zeleni kvadrat d.o.o. and Zigo d.o.o., with the same ownership and headquarter address, both of which are in the top five list by the profit margin and Zeleni kvadrat d.o.o also holds the fifth place by the number of employees.
Mungos razminiranje d.o.o. is the SOE with the largest number of employees (76) and as shown by the financial results, the company is struggling and has serious difficulties. In 2016, a strike was organized by the deminers of the company and the future of the company is uncertain.
4.1.2. Demining Machine Producers
Demining machine producers, together with demining service providers, represent the core companies of the Mine Action Program STPA. In Croatia, the two most important producers of the demining machinery are DOK-ING d.o.o. and Đuro Đaković specijalna vozila d.d. Table 7 shows the financial analysis of these companies for 2016. Additionally, the previously mentioned company Istraživač d.o.o. is also involved in the machinery production, but for this analysis it is placed in the demining service providers category.8 Đuro Đaković specijalna vozila d.d. is a member of the Đuro Đaković Group, whose largest shareholder is the Ministry of State Property, that is, the Republic of Croatia.
Table 7: Demining Machine Producers Financial Indicators, 2016 (EUR)
4.2. Peripheral Firms
4.2.1. PPE Companies
PPE providers supply the demining service providers with protective clothing, vests, aprons, helmets, visors, and other equipment that are designed to protect deminers from antipersonnel mines and UXOs and prevent injuries. Most of the PPE producers provide the PPE not just for the humanitarian demining industry but also for other industries such as firefighting, police, and security.
Table 8: PPE Companies’ Financial Indicators, 2016 (EUR)
4.2.2. Geo Mapping companies
Geo mapping companies hold the expertise in geodetic engineering or geodetics engineering. It represents a branch of applied mathematics that deals with the measurement of the shape and area of large tracts of country, the exact position of geographical points, and the curvature, shape, and dimensions of the earth (Dictionary.com, n.d.). The products of the geo mapping companies are extremely important in humanitarian demining in planning demining activities, reduction, and control of the MSAs.
Table 9: Geo Mapping Companies’ Financial Indicators, 2016 (EUR)
Distributors support the demining service providers with the necessary equipment for humanitarian demining. This includes protective clothing, manual metal detectors, equipment for proper handling of explosives, and so on.
Table 10: Distributors’ Financial Indicators, 2016 (EUR)
4.3. FDI in the STPA
One of the most cited investment typology frameworks (Dunning 1993) differentiates four main drivers behind FDI decisions:
- (a) Resource seeking: In this category, investments are driven by investors’ desire to access a country’s natural resource or the raw material (for example, oil, gas, minerals).
- (b) Market seeking: In this category, investors are primarily looking for benefit from the size of the market and selling goods and services in the destination countries and/or the surrounding region.
- (c) Strategic asset seeking: In this category, the main motive is to acquire or control the strategically important asset (for example, brand) in the destination country.
- (d) Efficiency seeking: In this category, the investor is driven by the desire to improve operational efficiency using “differences in availability and costs of traditional factor endowments in different countries.”
From 1993 to Q1 2017, Croatia has attracted approximately EUR 31.2 billion of FDIs, with around two-thirds of that amount coming from the Netherlands, Austria, Italy, Germany, Luxembourg, and Hungary. The main activities of FDIs included financial service activities, wholesale trade, real estate, telecommunications, retail trade, manufacture of refined petroleum products, construction of buildings, and manufacture of pharmaceutical products and other (Croatian National Bank 2017).
The World Bank analysis showed that only a minor part of FDIs in Croatia are investments in sectors based on knowledge and R&D. FDIs in Croatia were primarily attracted by sectors such as trade and financial sectors that do not necessarily promote knowledge transfer (World Bank Group 2006).
In the humanitarian demining industry, according to the information received during the interviews, several foreign companies were present in demining activities in Croatia in the past 20 years. These foreign investors were primarily machine producers with market-seeking aspirations. In addition, during demining activities, these companies often tested their latest machinery. The companies called Countermine from the United Kingdom and Scanjack from Sweden are examples of these foreign investors. Eventually, all of the foreign companies left the demining industry in Croatia because of bad financial results. However, many foreign companies still use and test their latest products and machinery on the CROMAC testing polygon in Cerovac.