Zagreb, September 2023 – Vlahovic Group conducted the “Investment in Government Relations and Public Affairs Functions by Companies Operating in CEE” research project. We are excited to share with you the first results which provide unique market insights into this sector and a new perspective from a generally unexplored industry in the region.

Vlahovic Group is constantly striving to improve our services to better serve the needs of our clients and to raise the awareness of the value public affairs and government relations bring. Following this commitment, VG conducted a survey among multinational companies operating in the CEE and Western Balkans/Adria regions to gain a deeper understanding of their current and projected practices and spending budgets for public affairs service providers.

The objective of the “Investment in Government Relations and Public Affairs Functions by Companies Operating in CEE” research project is to highlight the value of government relations and public affairs services and to encourage investing in larger budgets for more complex and multimarket public affairs campaigns. We believe the survey results make an important step towards achieving it because the available information can help multinational corporations in evaluating how to use their public affairs budget.

Here are the key takeaways from our research:

1. 1. Recognition of value: CEE market recognizes the value and potential of public affairs service providers as 64% of our respondents have previously engaged with them
   2. Budget insights: On average, companies in the CEE region allocate approximately €37,000 annually for public affairs activities
   3. Demand drivers: Primary driving forces behind the utilization of public affairs services in this region are: regulatory framework changes, country-specific investment cycles and country-specific political trends

The entire survey results are available by clicking on the pictures above, or here.

We hope that these insights will bring value to your organization as you navigate the intricate landscape of public affairs and government relations in the CEE and Western Balkans/Adria regions.

In case you would like to share your questions and observations, or discuss how Vlahovic Group can further support your public affairs efforts in the Western Balkans/Adria region, please do not hesitate to reach out to us.

Vlahovic Group stays committed to positioning and developing public affairs in the CEE markets.

Zagreb, May 5, 2023 – Vlahovic Group CEO Natko Vlahovic and Tomislav Lacovic, Partner in VG, wrote an article about the growing necessity for companies to start engaging in EU affairs. It got published recently in the News&Views Magazine of the American Chamber of Commerce in Croatia.

In conversations with entrepreneurs, I increasingly hear complaints that regulatory pressure is becoming more and more demanding to implement in their business, and the compliance costs are becoming higher. The conclusion, entrepreneurs say, is that they have less time and focus for their core business, and time is spent on complying with new regulations that simply catch them by surprise.

New regulations arise from new policies, and the drivers of new policies are increasingly EU legislators, not the local government. And indeed, when we start to analyze with entrepreneurs which regulations specifically burden them, we very quickly determine that they are EU legislative acts – directives and increasingly often regulations and delegated acts of the European Commission etc.

THE LEGISLATIVE FRAMEWORK OF OUR ECONOMY HAS BECOME DOMINANTLY SHAPED IN BRUSSELS

According to the analysis of the Vlahovic Group, in the current convocation of the Croatian Parliament as many as 55% of the adopted laws resulted from the transposition and implementation of EU legislation, and the other 45% are the so called domestic laws. Already most of the legislation is dictated by Brussels, and when it comes to economic topics, this ratio is even higher. This raises the question of when our economic entities and associations should become active in advocating and protecting their interests.

“ERA OF DIRECTIVES” PASSED, SHRINKING SPACE FOR EXCLUSIVELY NATIONAL ENGAGEMENT

The answer is – it depends on the type of EU legislative act. If it is a directive, which prescribes goals but shall be transposed into national legislation, leaving room for a national legislator to prescribe how, most business entities will not lose much if they engage with national institutions after the EU directive has passed and before or during national transpositions. If it is a regulation, the game is played in Brussels (not excluding the inputs coming from the capitals!), from the very beginning of its drafting. It must be said that the “era of directives” is behind us. Today’s European Commission is strongly marked by the trend of passing legislation directly applied in the Member States, therefore it is more important than ever to advocate your interest in Brussels. Another related trend is that the Commission (since the 2009 Lisbon Treaty) is assuming more power by passing an increasing number of delegated regulations, thereby prescribing various “technical details”.

TIMELY ENGAGEMENT IN ADVOCATING AND PROTECTING BUSINESS INTERESTS

It is a fact that the number of Croatian businesses engaged in interest representation at the EU level is still very low. It is almost impossible for individual businesses, without the support of professional consultants, to navigate the very complex decisionmaking process of the EU. It is more likely that such an unguided engagement, due to the “scattering effect” within the Brussels bubble with many points of influence, will lead to loss of resources and disappointment, rather than the desired outcome.

There are several models of engagement towards EU institutions, and all of them have in common that the building of coalitions and connections is essential for effectiveness. This is the answer to why there are so many professional lobbyists in Brussels, as well as various associations, platforms and coordinations that are also considered lobbyists and are registered in the EU transparency register.

Despite the perception that professional consultants/lobbyists are the most numerous category, they are one of the smallest categories (only 6% of total registrants) and the only one whose number has been decreasing in recent years. The market is consolidating, but the number of employed consultants is growing. Among the categories of registrants, the number of in-house company lobbyists and professional associations is growing the fastest, the trend that indicates two things from the beginning of the text – companies establish their own mechanisms for monitoring EU policies through dedicated departments, and when they actively engage in interest advocacy, they utilize professional associations and execute campaigns in concert with professional lobbyists.

Zagreb, December 16, 2022 – Vlahovic Group CEO, Natko Vlahovic, was a guest of the “Good Morning, Croatia” talk show on Croatian Radio Television (HRT). He presented news about the drafting process of the first Lobbying Act, which the Government of the Republic of Croatia is currently working on, and which is expected to be adopted in 2023. He also shared his thoughts on the development of the lobbying profession in Croatia and what such legal regulation would mean for its further development. If you are interested in the Croatian advocacy industry, please watch the entire interview below.

Testimonials

Zagreb, October 7, 2022 – Marking the 10th anniversary of the company, Vlahovic Group’s CEO Natko Vlahovic shared his thoughts on the company and profession’s development in an interview for News & Views Magazine by AmCham Croatia.

In the past twenty years, you have gained renowned international experience in lobbying practice, i.e. professional advocacy of interests. Although the term lobbying is used quite broadly, how would you describe what a professional lobbyist does?

You are right, the term lobbying is used quite pejoratively. In the narrowest sense, a professional lobbyist is a consultant with expertise in public policies, regulatory affairs and government relations. But it is essential to say that lobbying is not only done by professional lobbyists but also by interest associations, professional and foreign chambers, NGOs, trade unions, law offices, in house corporate lobbyists, and, of course, governments. One only has to look at the EU Transparency Register to get an accurate picture of what the lobbying scene in Brussels looks like. The register is mandatory for everyone who wants to influence EU policies and legislators. There are up to 30,000 people lobbying in Brussels, and only a part of them are professional consultants – lobbyists. Lobbying, like public relations or law practice, has its methodology, high standards of transparency and business ethics. It neither begins nor ends with arranging a meeting, and the perception of sitting at dinner parties is entirely wrong. However, unlike movies, lobbying is an office job. It requires a lot of analytics, research and study of matter. So, there is a lot more work on the case in terms of preparing a strategy on how to lobby, with whom and when, preparing arguments and various communication tools, and creating a win-win situation for both parties. There is a lot of this work, let’s call it detailed, precise work so that you can come up with an argument and convince someone that you have the right solution.

You have touched upon the EU Transparency Register. What is the legal regulation of lobbying in Croatia?

Legal regulation of lobbying is one of the critical anti-corruption measures. Professional and declared lobbyists, such as Vlahovic Group, are at the forefront of demands for transparency and legal regulation of lobbying. Last year, the government established a working group to draft a bill that should regulate access to political decision-makers. We believe it will contribute to the understanding that lobbying is an integral part of the democratic process and that lobbyists can help to see the implications of the solutions proposed by the legislators better and in advance. I think a significant step forward would be the introduction of a mandatory public register to bring unregistered lobbying into the sphere of illegal pressure on decision makers. After all, many countries in the EU have such laws, even some neighboring non-EU countries.

Besides Brussels, another “lobbyist bubble” is Washington DC. How is Washington different from Europe?

Surely. I had the opportunity to work in both capitals and get to know the scene intimately. Washington DC is the “birthplace” of lobbying and K Street sets the trends. American companies came to Brussels with their lobbying style, but they had to adapt and fix cultural differences. Almost every government uses lobbyists in Washington as they are part of the political fabric of the city. While the practice in the US is that lobbying services are associated with and provided by law firms, in Brussels, lobbying firms usually provide a broad spectrum of communications services, including digital advocacy and grassroots lobbying.

You started your career in diplomacy in Washington, you represented the interests of Croatian craftsmen in Brussels working for the chamber, and since 2012 you have been running your own company. How much does experience from different perspectives help?

For ten years now, Vlahovic Group has been representing and advocating the interests of the private sector before public authorities in Croatia, Brussels and the Western Balkans. In principle, previous experience of working in the public sector is very important for a lobbyist. And for the sake of understanding the methodology of work of public services and for the easier establishment of contacts. Equally important is the understanding of the interests of business entities and effective client management. We always try to win for our clients and find the best possible solutions that are acceptable. But for a good lobbyist, passion for an in-depth understanding of political processes is an essential ingredient.

How much have the expectations of professional lobbyists changed in the past ten years?

Clients are looking for help with much more complex projects than before. The political environment has changed tremendously after Covid. Issues have changed. Digital, energy, environment and defense sectors are hot now. More in-depth expertise across all sectors is crucial. Vlahovic Group has recently formed the Advisory Group with experts from various public policy fields and appointed former president H.E. Ivo Josipovic as the Chairman of the Advisory Group to help us navigate the region. In general, since we joined the EU, most decisions are made in Brussels, and companies should shift their focus to Brussels but also engage in influencing Croatia’s position so their voices can be heard as soon as the EU drafting phase or national implementation phase starts, depending on the type of the legislative act.

Where do you see Vlahovic Group in ten years?

The Western Balkans is the area of our interest. That’s why Vlahovic Group is expanding to Serbia and we have set up a new company there together with our partners. We believe that AmCham members, who in principle pay a lot of attention to compliance, will recognize that they can get top-quality lobbying services from us in Serbia as well. As for Croatia and the region, we wish to raise awareness of the positive aspects of the lobbying profession among political decision-makers and companies. We believe this will lead to the further professionalization of the lobbying scene and contribute to the transparency of political processes.

Link to the full article (pages 16-17).

Testimonials

The event was opened with an introductory letter by the Executive Director of AmCham Austria, Ms. Susanne Reisinger-Anders. “It is my pleasure to announce today the presentation of the Vlahović Group, whose topic we agreed on a few months ago, and which today’s circumstances make extremely relevant. We hope that our members will recognize the potential for investment in the energy sector in Southeast Europe. and we are glad to have experts here today who will bring us closer to these possibilities”, said the Executive Director of AmCham Austria.

Natko Vlahovic, CEO of the Vlahović Group, presented the portfolio of services and previous experiences of the company in representing investors from the energy sector in projects in Croatia and Western Balkan countries. We have been on the market for 10 years, and with a team of senior advisors covering sectoral policies such as energy, we are able to advocate the interests of investors, not only in Croatia but also in Slovenia, Serbia, Bosnia and Herzegovina, Kosovo, Albania, Montenegro and Northern Macedonia. The network of our regional associates in these countries allows us to identify the specifics of each market and to succeed in performing our methodology of government relations for our clients in each country.

Leo Dolezil, Senior Energy and Infrastructure Advisor at the Vlahovic Group gave an overview of the current state of the energy market in Europe. “High electricity prices are projected in the coming years and before the outbreak of war in Ukraine, the comparison of gas prices in recent months with those of last year seems almost unbelievable. In addition to turning to renewable sources, it is important to invest in developing the electricity distribution network to increase capacity”, said Dolezil. In the continuation of the lecture, he presented the investment opportunities and challenges of the energy sector on Croatian, Serbian and Bosnian markets. The business community that attended the lecture was interested in the experiences of setting up the LNG terminal on Krk and its prospects, the development of infrastructure for gas import from Azerbaijan and the possibility of financing projects from EU funds in the field of geothermal and solar energy.

The power-point presentation held will be shared with you upon your request at info@vlahovicgroup.com.

Testimonials

It is necessary to open a dialogue between public and private sectors and look at new perspectives for managing financial risks from natural disasters, it was concluded at a policy discussion organized by the Croatian Employers’ Association, the world’s largest insurance broker Marsh, global reinsurance broker Guy Carpenter (both from Marsh McLennan) and Vlahovic Group LLC.

According to the recent World Bank study “Financial Risk and Opportunities to Build Resilience in Europe”, whose findings were presented to the participants, Croatia ranks 4th in the EU in terms of 100-year natural disaster in terms of government liabilities relative to GDP. 

The approach that the World Bank promotes in the management of financial risks of natural disasters is to classify risks into layers according to frequency and severity and to determine the financial instruments of coverage adequate to that classification. Accordingly, budget reserves and reallocations can cover frequent minor hazards, medium ones are recommended to be covered from additional sources such as contingency funds, while for the rarest but also the most financially demanding hazards, such as those that have recently hit Croatia, the transfer of risk through insurance instrument is recommended. Natural disaster insurance enables the transfer of disaster risk to insurance and reinsurance companies and is a well-known practice in EU Member States and even neighboring countries in the region.

Mario Baotic, a London-based managing director at Guy Carpenter, global reinsurer intermediary, explained how parametric insurance works. “If the state insures itself against a natural disaster such as an earthquake, there is no need to wait for damage assessments. As soon as the intensity of the earthquake is above the agreed parameter, the payment is activated, and governments dispose of funds freely and invest them where they are most needed”, Baotic explained, saying that the practice is to form the so-called national disaster insurance pool require the cooperation of the national insurance sector, the international reinsurance sector, development banks, and the commitment and support of the government. “Everyone has to work together to build a successful model”, Baotic said.

The financial and physical resilience of the crisis management system should be built at the same time by considering new models to strengthen the overall capacity of the crisis response system and to climate changes, which are an increasing challenge, concluded the expert panel attended by State Secretary Zdravko Zrinusic and the head of the Sector for disaster risk reduction in the Civil Protection Directorate Drazen Stajduhar, while the current model of earthquake reconstruction was presented by the State Secretary in the Ministry of Construction Zeljko Uhlir.

Testimonials