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RR RUEHAG RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN RUEHLZ
RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHVB #0448/01 0961456
ZNR UUUUU ZZH
R 061456Z APR 06 ZDK
FM AMEMBASSY ZAGREB
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INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 03 ZAGREB 000448 
 
SIPDIS 
 
DEPT FOR PRM: ROLSON 
DEPT FOR EUR/SCE: BBELL, JMITCHELL 
BELGRADE FOR SCHEEVER 
SARAJEVO FOR RMEYERS 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PREF PGOV HR
 
SUBJECT: GOC'S REFUGEE PROGRAMS: PUTTING THEIR MONEY WHERE 
THEIR MOUTH IS 
 
Ref: Zagreb 173 
 
ZAGREB 00000448  001.2 OF 003 
 
 
Sensitive But Unclassified.  Please Handle Accordingly. 
 
¶1. (SBU) Summary and Comment.  Ambassador and Principals 
from the EU, UNHCR, and the OSCE convened with Minister 
Bozidar Kalmeta on 15 March to review the month's progress 
on refugee issues.  The Minister provided the GOC's 
sizeable financial commitments, which total $350 million in 
2006 - or one percent of Croatia's GDP.  Due in part to 
Post's activism, the GOC has stepped up its re- 
electrification program and hopes to finish by 2007.  With 
IC assistance, the GOC has developed a draft solution for 
handling property investment claims of temporary occupants, 
which should help resolve the 25 outstanding cases. 
Progress on the housing care program (occupancy and tenancy 
rights, or OTR) remains slow: the GOC has only resolved a 
small number of applications.  Kalmeta presented a 
comprehensive and ambitious housing implementation plan. 
If the GOC does implement the program in a timely manner, 
they will make a significant step this year towards 
completion.  However, the GOC needs to update its entire 
refugee "Road Map" and commit to quickly resolving 
outstanding issues.  Areas such as residency status and 
investment claims are much more straightforward (and 
inexpensive) than complex programs such as housing, and 
therefore could be quickly settled. 
 
¶2. (SBU) In a related meeting on 27 March, the three 
international organizations met with their colleagues from 
SAM and B-H to revive the stalled Sarajevo Declaration 
process.  The most contentious issue within those missions 
remains Croatia's progress on resolving OTR.  The group 
sent a mildly-worded letter to leaders of the three 
countries noting that they are behind schedule and 
requesting resolution of the outstanding issues.  They 
specifically addressed OTR in Croatia and local integration 
of refugees in SAM.  Head of the OSCE Mission in Croatia 
Ambassador Jorge Fuentes told us that he believes the GOC 
is not getting credit in the region for the progress they 
have made.  We are encouraged by the GOC's implementation 
plans as they are more specific than in the past.  Post, 
along with other IC members, will continue pressing the GOC 
to resolve outstanding issues and ensure completion of 
their commitments.  End Summary and Comment. 
 
The Bottom Line: Financial commitments 
 
¶3. (U) Minister Kalmeta presented to the Principals the 
large financial commitments required to close the refugee 
portfolio.  In 2006, the GOC plans to spend a total of $350 
million from all Ministries on refugee-related programs. 
Kalmeta's budget advisor told us that figure represents 
about 1 percent of Croatia's GDP, indicating that refugees 
are an issue that they are actively working to resolve. 
Kalmeta's Ministry's budget this year is $275 million for 
these programs, and he told us that the 2007 budget will be 
similar; as reconstruction funds sunset because of program 
completion, the GOC will reallocate those funds for social 
and economic recovery programs in the war-affected areas. 
 
¶4. (U) For 2006, the GOC has budgeted $114 million for 
house reconstruction that will largely be completed this 
year.  Ninety-one million dollars will be allocated for 
reconstruction of utilities and infrastructure projects and 
about $50 million will be spent on demining (about one 
quarter of which comes from donor funds).  A general fund 
for refugee, returnee, and IDP assistance totals $27 
million.  In addition, another $68 million will be 
allocated for various housing and construction programs 
primarily in war-affected areas. 
 
Plugging in Returnee Villages 
 
¶5. (U) The GOC plans to increase the pace of re- 
electrification and complete it by 2007 (although OSCE 
estimates it will take another three years).  The state- 
owned electricity company, HEP, will have a sizeable profit 
for 2006 and will reinvest about $8.3 million of it towards 
re-electrification.  Next year they anticipate similar 
profit and reinvestment.  In total, the GOC will spend $20 
million on re-electrification this year, which includes 
about 30 ethnic Serb villages.  According to this plan, 
about 200 ethnic Serb villages will remain to be connected. 
In April, the Ambassador will visit for the second time an 
 
ZAGREB 00000448  002.2 OF 003 
 
 
ethnic Serb returnee village that was recently re- 
electrified after more than seven years of darkness. 
 
Recognizing Occupancy and Tenancy Rights 
 
¶6. (SBU) Prior to the meeting, Post and other IC members 
received from the Ministry a detailed plan for former 
holders of occupancy and tenancy rights (OTR).  The four- 
year implementation plan foresees the expenditure of $200 
million for the purchase and construction of 3,875 
apartments in mostly urban areas and the expenditure of 
$123 million for similar apartments in the war-affected 
areas.  Funds will be secured in part by potential loans 
from IFIs.  There are a total of 8,500 applications that 
the GOC intends to resolve within the year.  The GOC will 
provide a breakdown with specific annual targets for the 
program, which includes purchase of 400 apartments in 2006. 
 
¶7. (U) The construction of extra apartment blocks, 
particularly in urban centres such as Osijek, Karlovac and 
Sisak, will start at the beginning of 2007.  In the 
meantime, the GOC has promised to keep Principals informed 
on a monthly basis of the preparations for construction 
(urban planning, purchase of building sites, and the 
process of issuing public tenders).  Principals asked that 
the GOC avoid ghettoization of Croatian Serbs through an 
allocation of apartments in ethnically mixed areas. 
 
¶8. (SBU) State Secretary Damir Spancic reported OTR 
progress to the Principals in the past month.  His office 
has sent notices to 800 former OTR holders that their 
applications have been approved and noted that the GOC has 
allocated apartments to an additional 18 families since the 
prior meeting.  Kalmeta told the Principals that the 
program's implementation is only constrained by the GOC's 
general financial restrictions.  The IC noted that the pace 
of allocation needs to increase in order to close the 
portfolio anytime soon. 
 
Resolving Unsolicited Property Investments 
 
¶9. (SBU) Currently there are about 25 legal cases of 
temporary occupants who are requesting compensation from 
owners for improvements they made to a property while they 
lived in or operated a business out of it.  These cases, 
while often egregious, are few, and the IC and the GOC are 
collaborating to develop a solution.  Working with the 
State Attorney's Office, the Ministry drafted a protocol by 
which the State would settle those cases after the court's 
final outcome.  OSCE and others suggest that the GOC 
intervene to resolve those cases before the court decision. 
Given the small scope of the problem, Fuentes noted, it is 
best for the GOC to be proactive and not to involve the 
owners in the resolution at all.  In our working level 
meetings, Spancic agreed to such a solution and indicated 
that the owners will be informed and will not be 
financially liable. 
 
Regulating Resident Status 
 
¶10. (SBU) Another outstanding issue for refugees is their 
ability to regulate their resident status.  Without clear 
status, they are unable to access refugee or state programs 
such as health care, education, etc.  The deadline to do so 
expired in June, 2005 and the GOC has processed most of the 
individuals who applied.  However, several thousand people 
did not meet the residency requirement as they were not 
present during the war.  The law is being redrafted to meet 
EU regulations, although that version does not include an 
exemption from general requirements for refugees.  The IC 
has requested re-opening the deadline and redrafting the 
law.  Kalmeta advised the IC to raise the issue with the 
Prime Minister. 
 
OSCE: Coordinating Views Regionally 
 
¶11. (SBU) In a separate meeting between the IC Principals, 
Fuentes told Ambassador about the regional divergence of 
opinions within the OSCE.  Fuentes recognizes Croatia's 
moderate progress and in fact recently commended the GOC 
for its attention to national minorities.  However, 
missions in neighboring B-H and SAM believe that the GOC 
needs to do more, particularly in resolving the OTR issue. 
Croatia is losing the "diplomatic campaign", he added, in 
that they are neither clearly explaining their efforts nor 
 
ZAGREB 00000448  003.2 OF 003 
 
 
getting credit for the progress they have made.  Following 
the success of the monthly refugee meetings, the GOC has 
agreed to establish monthly OSCE meeting with the Ministers 
of Justice and Foreign Affairs to encourage progress on 
other OSCE-mandate issues. 
 
¶12. (SBU) In order to better coordinate their regional 
position on refugee issues, the three OSCE missions met in 
January.  They agreed on a common position for OTR but have 
not resolved details: Croatia, they believe, should speed 
up implementation of the OTR program and devise a mechanism 
for all former OTR holders not included in the program. 
This would be a "Fair Compensation Settlement".  OSCE in 
Croatia suggests that compensation for those who plan to 
remain in SAM and B-H be settled in a future succession 
agreement.  It envisages that the IC find donors to provide 
money or construction material for former OTR owners who do 
not wish to return.  OSCE in SAM and B-H want compensation 
for those who do not wish to return and presume that funds 
would come from the GOC.  They have not evaluated the scope 
of either compensation plan. 
 
¶13. (SBU) The missions agreed that Croatia does not need to 
amend the Law on Reconstruction, as implementation is 
included in its Road Map.  However, they still want to see 
progress on several issues that have not been included in 
the Road Map.  Specifically: sharing of war crime lists 
with regional partners in line with judicial cooperation 
agreements.  (Note:  Croatia has already shared its list 
with the GOSAM); recognition of documents including years 
worked in Serb controlled areas; regulation of permanent 
and temporary resident status; resolving unsolicited 
investment claims; improving minority representation in 
state administration; and returning agricultural land and 
business premises. 
FRANK