„Uljanik is a kind of institution in our city. And when I say that, I mean institution in the truest sense of the word. With its foundation in 1856, the shipbuilding, production, industry and everything that it has achieved for our city and still does, and here I mean the construction of sports infrastructure and the employment and training of our people“(UL-S-3).
The shipyard Uljanik and the city of Pula are closely interwoven, as the deputy mayor points out in the interview above. He addresses interdependencies at several levels. In terms of urban planning, the city of Pula has always taken Uljanik into consideration. Examples are the design of the Riviera or the railway line, which has not been closed yet due to Uljanik. The deputy mayor suggests a financial interdependence by mentioning mentions that lately the city has been waiving the fee of HRK 60 million, in order not to put the shipyard in further difficulties on the one hand, and the city’s dependence on taxes paid by its largest employer on the other. Thirdly, he mentions the employment factor that guarantees the sustainable income of the local community and thus also keeps the local economy alive and relieves public organizations such as the Croatian Labour Office. „If we consider that more than 2,000 people are employed in Uljanik, it is that they are family members – average families with 3 or 4 members – then we see how important Uljanik is in terms of all these jobs in Uljanik and in shipbuilding.“
Uljanik has always been more than a private and self-contained company that pops up in the media and then disappears again as a black box. The boundaries between the shipyard and the local community and even the state have always been fluid. Croatia’s active industrial policy contributed a decisive factor because it did not back away from granting subsidies and even from taking ownership responsibility. Thus, Uljanik can be described as a hybrid organization, not entirely private, neither entirely non-profit nor public. Although the factory wall has been losing its symbolic power because of spin-offs and outsourcing in post-socialism, Uljanik continues blurring the distinction between public and private companies.
Public Affairs – From Multiplier to Divisor
The willingness of the Socialist Republic of Croatia to prevent Uljanik’s insolvency established a system of soft budget constraints. Such socialization of corporate debt has led to a blurring of the boundaries between the shipyard’s account and the state budget. Even after 1991, when the self-managed enterprise was being transformed into a joint-stock company, State actors spent a lot of taxpayers‘ money on bailouts and further subsidies. The survival of the yard continued to be a matter of public interest as State actors holding company shares risked a loss. State banks ran the risk of bearing the costs of loans that had not been repaid. It was evident for all persons concerned that if the company went bankrupt, the costs of unemployment insurance would rise. In addition to the financial risk, in case of bankruptcy, the State would lose an efficient means of controlling the economy. The case of Uljanik shows that the fate of companies is deeply intertwined with the political environment.
The historical background of this entanglement is based on the outstanding and favorable status of shipbuilding in Yugoslavia. Shipyards brought in hard currency to a chronic import surplus country and were considered to have a beneficial multiplier effect on other businesses. This was the reason why the Socialist Republic of Croatia and the regional banks Riječka and Istarska determined to support the shipyard during its liquidity crisis in the early 1980s. The fact that Yugoslav State actors did not have a serious instrument to threaten businesses with insolvency, led to the transfer of all business risks to the State actors. The system of risk assumption promoted a network of State actors and banks whose task was to keep chronically illiquid work organizations alive.
The situation was very similar in 1995. A creditors‘ council was set up, which took some of the responsibilities of management. State actors such as the Croatian Privatization Fund reduced the yard’s liabilities by HRK 2,5 billion. During another business crisis in Uljanik in 2000, debts to private banks were transferred to the State Agency for Bank Restructuring. The yard was exempted from employers‘ social security contributions and overdue interest on loans to the Ministry of Finance and the liabilities of the Ministry of Economy was cut.
A similar mechanism can be observed in the company’s existential crisis that began in 2017. This time, however, the State’s room for maneuver was limited by the European Union State aid rules. The instrument of public guarantees maintained the ownership distinction between the State and the shipyard, but it did not eliminate the State’s risk. These guarantees were used to pay wages and keep production running and nobody knew if Uljanik could pay them back. The guarantees led to an intertwining of the fates of the shipyard and State actors and provided additional pressure on the State. Since the State would not get back its guarantees if the shipyard went bankrupt, it was forced to support the survival of the yard. The State was already a creditor for 90 percent of Uljanik’s debts. The losses caused by guarantees provided by the State in case of bankruptcy would amount to EUR 650 million and a further EUR 70 million to the State-owned HBOR bank. Moreover, the state-owned energy company HEP, the municipal service providers and the employees would probably have to bear the costs on their own.
The consequence of bankruptcy would be just as much a socialization of costs as it is in the case of State-driven restructuring. The economic multiplier effect turns into its opposite. The negative multiplier effect – let’s call it divisor effect – made the impact noticeable not only by the State but also by households. Starting at the beginning of the year 2018, more and more appeared in the media about how much Uljanik would have cost society and each citizen: a journalist from a controversial news portal estimated that Uljanik cost an average Croatian family about EUR 6,000.
Multi-Task Company – From internalization to outsourcing
The characteristic feature of the socialist welfare state in Eastern and Southeastern Europe was the overlapping of State structures and company structures. According to Hübner, it was characterized by „social services organized around labour“. In socialist economies, many social benefits were internalized in companies. The company was not reduced to its economic function only. Due to the exposed position of further functions, Brunnbauer questions the boundary between public and private. „Large companies, in particular, had an impact on many areas of life beyond direct work […] they were a place of intensive socialization“.
In Yugoslavia, the trend to the shifting of social policy towards the enterprises intensified with the expansion of the self-management economy in the 1960s. Since the restructuring of the shipyard in the 1970s, the social welfare has been organized by Working Community of Common Services. It included legal services, occupational health and safety, military self-defence and personnel tasks. With the constitution of 1974, the working community was split up and a separate working community Social Standard was established. Social Standard took care of social services such as housing, canteens and holiday homes for employees and remained closely linked to the trade unions and workers‘ councils. One recurring motif these days was catering, as the shipyard was unable to provide enough hot meals for 6 700 employees and about 1 000 co-operators.
The most important issue for Social Standard was housing. In the course of the economic reform of 1965, the competence for housing was transferred from the level of the Republic and the municipality to the enterprises. „Thus, rental housing provision came to be institutionalized as a form of employment benefit.“ From the outset, housing construction was a chronic problem of the shipyard and was partly mitigated by privatization, i.e. by providing employees’ loans for private house construction. In general, Uljanik had a housing fund at its disposal which could be topped up by the national solidarity fund. While in 1976 92 percent of the Uljanik housing fund was spent on the construction of housing, in the 1980s the share of private loans increased. In the second half of the 1980s, housing construction halted due to high inflation and Uljanik’s illiquidity. Only the supply of food was continued, thus helping to mitigate the social impact of the crisis on shipyard workers.
The housing fund, as well as the entire working community Social Standard, was subject to increasing control during the Yugoslav economic crisis. In 1989, all the real estate belongings to the Uljanik were inventoried and prepared for asset valuation by the management consultant PriceWaterhouse, and finally on sale. In a list of estimated property values, the value of Uljanik Standard (DEM 130 198 000) was the highest among all units by far; twice as high as the one of the yard (DEM 67 800 000). This was mainly because of the company apartments. When the first HDZ government in 1990 passed a housing reform in 1990, which provided for the sale of company flats, the housing business provided by Uljanik Standard was being stopped. Social Standard was transformed into a company on its own within the Uljanik Group. The newly created company consisted of 214 employees. It managed bachelors‘ hotels, the Novi Dom, which housed the vocational training, and the Stari Dom, which housed the offices of Uljanik Standard, the recreation and sports facilities Veruda, Bunarina, Fratarski otok, the hospital „Arsenal“, the ship „Ulika“, the House of Youth, refectories, three canteens and 3,300 apartments.
In the 1990s, Standard was a hybrid organization that felt both „bound to the wishes of the workers“ and had to „generate sales“. The recreation and sports facilities underwent a profound upheaval. Places that had previously been seen as second homes by many employees became places full of increasingly strict regulations. A conflict arose in the port of Bunarina when the management banned the playing of cards on the premises. The newly appointed manager expected that Standard would act self-sufficient then. „This company cannot offer lower prices if it does not at the same time absorb the price difference itself. If it’s not charged by the end-user, someone else has to pay for it.“ According to the director’s new strategy, „free capacity should be made available to the free market in order to reduce the company’s costs.“ The company’s assets should gradually be linked to local tourism. In Bunarina, the restaurant infrastructure was to be improved; the Ulika ship was rented to Kompas, a tourist service provider, and the stadium of the Uljanik Works Association on the Veruda site was to be rented for other purposes.
The factory wall of Uljanik is about 2 200 meters long and separates Uljanik from the rest of the city of Pula towards the south and east physically. In the north, 1 500 metres of the Adriatic Sea surround the company site. During the socialist period, the wall was a physical element in Pula without any real constraints for the complex relationship between Uljanik and the local community or public actors. One of the tasks of the management after the re-establishment of Uljanik as a company was to clearly draw the line between the company and its local and State environment, i.e. hardening the factory wall as a border. The concept of a core business should help to provide criteria for this distinction. The number of working organizations that were integrated into Uljanik before its transformation into a joint-stock company had shrunk from 13 to the following companies by 2006: shipyard, engine plant, equipment construction, a public relations service company, post office, occupational health and safety, and Uljanik Standard. After the long-time Chief Executive Officer (CEO) had retired, his successor Antun Brajković wanted to continue the company’s contraction. According to him, the sale of companies not directly related to shipbuilding led to „a reduction in space requirements and we intend to sell part of the real estate in order to complete the technological conversion we invested in.“ The company, therefore, decided to sell the Stari Dom, the Novi Dom and the Kasarna office building to the city and also announced the sale of the legendary rock club Uljanik. Only the sports facilities were not provided for privatization at that time. The sales aimed to bundle the company behind the walls of the Arsenal, which had historically represented a physical border to the city, but not a distinct boundary of systems.
In 2017, as the result of a severe debt crisis, Uljanik sold the remaining assets beyond the factory wall – the stadium and the island of Fratarski otok – to the city. The island with its infrastructure, sports facilities and campsites was transferred to the trading company Fratarski otok. In the same year the stadium Veruda, located in the eponymous district Veruda, was handed over to the city administration. This sale was necessity-driven, but it was also ideological: render unto Caesar the things that are Caesar’s. The company had lost its multifunctional role in the local community and the connections between them were slowly breaking away. This made the factory wall harder and duplicated it within the minds of Pulanian inhabitants: an invisible wall has been built, a wall that disconnected the traditional relations between State, city, community and the company Uljanik.
Peter Wegenschimmel is a business historian at the Leibniz Institut for East and Southeast Europan Studies.
 The interview was conducted by Andy Hodges as part of the project „Transformations from Below: Shipyards and Labor Relations in the Uljanik (Croatia) and Gdynia (Poland) Shipyards since the 1980s“ in 2018.
 Debeljak o Uljanik Grupi: ‚Stečaj ili restrukturiranje? Za državu je jednak trošak, Jutarnji List, 2019 March 11, https://novac.jutarnji.hr/aktualno/debeljak-o-uljanik-grupi-stecaj-ili-restrukturiranje-za-drzavu-je-jednak-trosak/8472587.
 Debeljak: Moje rješenje za Uljanik uštedjelo bi državi 400 milijuna eura, Jutarnji List, 2019 March 15, https://novac.jutarnji.hr/incoming/debeljak-moje-rjesenje-za-uljanik-ustedjelo-bi-drzavi-400-milijuna-eura/8490413.
 Kako su milijarde bacili u vjetar: Kratka povijest državnih jamstava, Narod.hr, 2019 March 30, https://narod.hr/hrvatska/kako-smo-milijarde-bacili-u-vjetar-kratka-povijest-drzavnih-jamstava.
 Peter Hübner, Arbeitsbeziehungen und soziale Sicherungen für Arbeiter in Ländern des sowjetischen Blocks, in: Peter Hübner / Christoph Kleßmann / Klaus Tenfelde (eds.), Arbeiter Im Staatssozialismus. Ideologischer Anspruch Und Soziale Wirklichkeit. Köln 2005, 262.
 Ulf Brunnbauer, Der Mythos vom Rückzug ins Private. Arbeit, Konsum und Politik im Staatssozialismus, in: Nada Boškovska / Angelika Strobel / Daniel Ursprung (eds.), Entwickelter Sozialismus in Osteuropa. Arbeit, Konsum und Öffentlichkeit. Berlin, 2016, 41.
 Priprema se tematska konferencija o društvenom standardu, Uljanik 14 (1982), 3.
 Srna Mandič, Housing Provision in Yugoslavia. Changing Roles of the States, Market, and Informal Sectors, in: Willem van Vliet / Jan van Weesep (eds.), Government and Housing. Developments in Seven Countries. Newbury Park, 1990, 298.
 Sasha Tsenkova, Housing Policy Reforms in Post Socialist Europe. Lost in Transition. Heidelberg, 2009.
 Pad standarda čini svoje i kod Uljanikovaca, Uljanik, 108/109 (1989), 24.
 Zatvoreni Krug, Uljanik,99/100 (1989), 32.
 Archive of the Centar za restrukturiranje i prodaju, 3229238, „Uljanik“ – Pula. Osnovne karakteristike pretvorbe – Pula, 9.3.1992.
 RJ Društveni Standard prerasta u poduzeće, Uljanik, 112/113 (1990), 14.
 The remaining apartments belong to the city and were made available to Uljanik for administration. Zarada u prvom planu, Uljanik, 116/117 (1990), 14.
 Pula preuzima od Uljanika prostore od 30.000 četvornih metara, Poslovni.hr, 2006 October 19, http://www.poslovni.hr/hrvatska/pula-preuzima-od-uljanika-prostore-od-30000-cetvornih-metara-24787.