The European Commission has initiated a detailed investigation to determine whether public support provided by Croatia to the state-owned company Hrvatske Šume doo (HŠ) and other Croatian wood processing firms aligns with EU state aid rules. The support being questioned stems from "an absence of compensation from HŠ to the Croatian state for the special rights to manage and commercially exploit Croatia’s public forests." This inquiry also raises suspicions about the pricing terms set by HŠ, which allegedly do not reflect market rates offered to certain wood processing companies under contract with HŠ.
The Commission's preliminary assessment has highlighted significant concerns about the special privileges afforded to HŠ in how it utilizes public forests. By failing to compensate the Croatian government adequately, it appears HŠ may have received undue economic advantages when compared to private forest owners, who must purchase or rent forest land to compete effectively. This raises important questions about fair competition within Croatia’s forestry sector.
Citing potential economic benefits favored by selected clients of HŠ, the Commission is examining whether the decisions made by HŠ are independent commercial choices or the result of directives from the Croatian government. These inquiries will seek to ascertain whether these arrangements have led to advantages not permitted under EU state aid regulations.
According to the European Commission, if the investigation confirms these preliminary concerns, Croatia may be required to adjust the nature of its support for HŠ and potentially reverse any illegal aid received. The outcome of this investigation could have broader ramifications, impacting the way state aid is managed across EU member states, especially concerning natural resources.
Environmental groups welcomed the investigation, arguing it could enforce stricter regulations on how natural resources are managed and prevent unfair competition disadvantaging private forest owners. They hope the findings will promote sustainable forestry practices and encourage equitable resource management.
The findings from this investigation will be pivotal for both Croatia and the EU. Should the Commission find irregularities, there may be significant financial and operational consequences for HŠ and related industries. Conversely, if Croatian authorities can demonstrate compliance with EU regulations, it might reinforce current practices and provide lessons on maintaining fair competition.
Moving forward, the investigation will assess various factors, including market prices offered to wood processing firms, the competitive environment of the Croatian forestry sector, and the regulatory framework governing state aid across the EU. The Commission aims to conclude its examination by reviewing all evidence, including market analyses and expert testimonies, to establish the legality of the support provided to these companies.