Sustainable Development of Islands Using European Funds: An Upgrade of the Operative Coast of Hvar Port

Sustainable Development of Islands Using European Funds: An Upgrade of the Operative Coast of Hvar Port

Srecko Favro
DOI: 10.4018/978-1-5225-8970-9.ch016
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The Island of Hvar is part of Split-Dalmatia County and it is surrounded with a group of islands in Central Dalmatia. The island's dependence on the rest of Croatian mainland is inevitable and islanders' lives are still connected with the mainland. The trend of emigrating and abandoning the island is visible. Transport connections and infrastructure between the Island of Hvar and the mainland are unsatisfactory. At the moment, there is not an adequate pier for catamarans intended for a fast island-mainland travel in the area of Hvar Port. Therefore, the topic of this project and research is to present the importance of building infrastructure and the importance of a quality work of fast shipping lines between the town of Hvar and the mainland in order to enhance life quality of people who live on islands.
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The purpose of this project is to create services that will raise life quality of islanders and locals in order to remain on the island and to decrease depopulation. The financial analysis includes all investment costs for project realization upon which the amortization has been calculated. The method of discounted cash flow has been used for the financial analysis. Moreover, funding sources have also been processed and according to investment height all costs are eligible for co-financing and therefore it is not necessary to provide own funds or involvement of credit institutions.

All operative costs as well as revenues have been analyzed only for the newly built part of the Port of Hvar in order to determine the necessity and justification of using EU funds. The profit loss account is positive for all years of project duration and the net profit is minimal in relation to the amount of revenue earned. In order to justify the use of EU funds, a financial return on investment and FNPV/C have been calculated. Financial sustainability of the project is higher than zero over all these monitored years, so it has been proved that the project has sufficient financial resources to cover project costs.

In order to demonstrate that the project has a positive impact on the society, an economic analysis has been done. Positive and negative effects on the social well-being of the Island of Hvar have been shown in the qualitative economic analysis. Effects on reducing depopulation by creating new workplaces have been shown as the project will create at least 17 new work places indirectly through the realization of the project that will significantly affect the economic development. Upgrading the operative coast of Hvar Port1, it is expected an increase in the number of guests, who will, based on an estimated average consumption, generate HRK 3.9 million yearly which will significantly influence the opening of new SMEs. A new maritime line will have a very positive effect on the locals as it will significantly improve mobility and mainland accessibility which is an increase of 15% compared to the current situation. Taking into account financial results, unfavorable economic situation and insufficient development of ports of national importance for the Republic of Croatia, it is difficult to expect some major state funds in the following years for the Port Authority of Split-Dalmatia County.

At the same time, as the member of the European Union, Croatia has available funds from European funds intended for such infrastructural projects, i.e. projects with a negative financial analysis but with a great impact on the environment. It is necessary to ensure a combination of financial resources from EU funds, state budget, the County’s budget and the financial flow of the Port Authority of Split-Dalmatia County for the realization of this project.

One of the biggest causes that slow down the development of Croatian islands is the current traffic connection that still isn’t strong enough to integrate an urban centre on the coast and the surrounding islands into a unified economic centre. It has been shown that the modernisation of ferry and ship lines has a positive impact on economic and demographic development of islands (Smoljanović & Smoljanović, 2011).

The basic issue concerning the development of the Island of Hvar is the lack of interest of local and state authorities in infrastructure investments, as well as the lack of financial resources for investing in capacity increase. Another issue is also a high regulatory charge that disables larger infrastructural interventions. For this reason, the port infrastructure is getting out of date, the security is reduced, port capacities are being decreased, and transport conditions are getting worse.

A poor infrastructural condition of the port indirectly deteriorates the standard of islanders, makes it difficult to communicate within island destinations, influences emigration of families with children due to inadequate elementary and secondary education on the island, disables islanders to go to work on a different location every day, etc.

It can be concluded that transport connection of islands is a very important factor for an unobstructed further development of islands (Institute of Tourism, 2009). Connected islands have numerous advantages referring to:

  • A stronger integration into the coastal transport system

  • A more favorable demographic structure

  • A considerable decline in depopulation

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