TO: PRIME MINISTER OF REPUBLIC OF SERBIA
In accordance with article 133 paragraph 1 of the Constitution of Republic of Serbia, and article 23, paragraph 1 of Law about Government, I hereby resign my post as Minister of Economy in the Government of Republic of Serbia.
R E A S O N S F O R D E C I S I O N
Legal Grounds
Article 133, paragraph 1 of the Constitution of Republic of Serbia and article 23, paragraph 1 of the Law about Government prescribe that the Minister can submit his resignation to the Prime Minister of Government, which the Prime Minister of the Government then submits to the President of the Parliament.
Reasons for Resignation
During the reconstruction of the government, I have been appointed the Minister of Economy on 2 September 2013. The part of government plan regarding economy, which I wrote together with the Minister of Finance, which represented grounds for economic policy of the Government, and which contained necessary reforms that have been postponed for decades, consisted of five key points. They should have assured economic growth, employment and improvement of living standards for citizens:
- Regulatory reform – creation of more favourable business environment – changes in Law about Bankruptcy, Labor Law and Law about Planning and Construction
- Decrease of labor tax – as a key measure for stimulating economy and the main prerequisite for the fight against gray economy, black market and illegal employment
- Conclusion of restructuring of 153 companies, which have been in the process of restructuring for a decade, and which, according to the study of the World Bank, cost the state over 750 million dollars on an annual basis
- Introducing order in the public sector, especially public companies, corporate management, decrease of state’s involvement in economy, relying on public sector, healthy state
- Managing banking sector, which has been burdened by consequences of catastrophically bad privatisation process, irresponsibility of new owners-managers, as well as banks themselves – all of it leading to the high level of NPL and high interest rates for business loans
Not even one of these reforms have been implemented. The most was done in preparation of the Law about Bankruptcy and Privatisation, companies’ ID cards and preparations of financial restructuring for the remaining 153 companies. In the end, this reform was stopped.
New package of measures for economic stabilization is completely wrong. Neither Government, as a collective body, nor the Ministry of Economy ever worked on it. It was made by Ministry of Finance and the Cabinet of the First Vice President of the Government. Out of protest, Minister of Economy was not present at the public session of Government when this package was presented to the public.
The accepted budget for 2014 is unsustainable. Some parts of it are frivolous and it is nowhere near anything that Serbia needs. To mention just one thing: without any written document, based only on oral information from the third hand, we are expecting 3 billion Euros from the United Arab Emirates.
Decrease of labor tax and introduction of progressive tax, as key measures for stimulation of economy and suppression of gray economy, was completely abandoned without any serious discussion, and not just as a part of budget for the year 2014, but for years 2015 and 2016 as well. Increase of taxes and decrease of spendings without decrease of labor tax is economically unsustainable. At the very beginning of this Government’s mandate in 2012, a package of measures for fiscal consolidation was adopted, aiming to increase taxes and decrease spendings. As a result, our debt is now 4 billion Euros bigger than it was, deficit has increased, tax income has decreased and economic activity has decreased. After reconstruction of government, we are trying the same thing and expecting a different result.
Employment of people along the party lines and prioritizing party people, regardless of the level of their expertise, above all others, obviously represents the official politics of Government. Minister of Economy is of the opinion that this is an unacceptable part of coalition agreement. It is due to refusal to accept such politics that the Ministry of Economy ended up having a serious conflict with the Cabinet of the First Vice President. The fight with this Cabinet over appointment of general managers of agencies which are under this Ministry’s jurisdiction, lasted for almost three months. Instead of supporting the Minister in reforms, the support went to the current general managers of these agencies who did their best to undermine the politics of the Ministry of Economy in all possible ways. This is the reason why I did not attend Government meetings for a month, since this was the only method of pressure that I had to try and unblock reforms. This battle was won only in late November.
Previous Minister of Finance and Economy actually stayed part of this Government too, as an active member of the Cabinet of the First Vice President. The battle for abolishment of the failed projects of handing out subventions, negligence and criminal activities in SIEPA (Serbia Investment and Export Promotion Agency), ALSU (Bankruptcy Supervision Agency), Development Fund and Privatisation Agency, damaging privatisation of ‘Vršački vinogradi’ and ‘Prva petoletka’ lasted from the very beginning until today. People from the Cabinet of the First Vice President were directly involved in the ‘Vršački vinogradi’ fiasco, both on the side of the seller (the state) and the side of the buyer (via family members and their companies). Orders were issued to the general manager of the Development Fund to unblock certain companies of tycoons, and they came directly from the Cabinet, without any knowledge of the Minister of Economy.
Disrespect of the institutions of the system, Ministry of Economy and agencies under its jurisdiction is obviously a part of economic strategy of various cabinets and political parties. Full trust in Arabic, Chinese, Russian, Belorussian and other miracles, non-transparent contracts, subventions and other failed policies of the previous minister are still, it seems, the only politics that is truly counted on.
Representatives of the Cabinet of the First Vice President tried, and are still trying to meddle into the jurisdiction of this Ministry, without any procedure, public knowledge or economic analysis of whether these projects are useful or damaging for the Republic of Serbia. Everybody wants to be a part of some deal they will make. All of these non-institutional projects have been successfully stopped by the Ministry of Economy, but huge energy and amount of time was spent in order to do it. Examples are many: all of the ‘Arab businesses’, the deal with Etihad, Al Dahra, deals connected to Fiat, promising and handing out of subventions, creation of the joint company with Gorenje.
Damaging secret contract between Republic of Serbia, JAT and Etihad, and especially its non-institutional implementation represent the best example of these kind of deals. Cabinet of the First Vice President prevented Ministry of Economy from receiving JAT ID card and estimation of its property’s value for months, thus preventing its financial restructuring. Messages that irresponsible managers kept receiving that the Government does not support the Ministry of Economy had direct repercussions for the level of their cooperation. Since the Ministry of Economy refused to suggest to the Government to sign contracts which were damaging for Republic of Serbia, the Cabinet of the Vice President overtook the role of the proposer of the law, contrary to the Law about Ministries. After Ministry of Economy would give a negative opinion about Government conclusions which allowed such practices, for example: joining of JAT Catering company with JAT, such opinions never made it to the Government meeting’s agenda, while conclusions were always adopted.
After Ministry of Economy suggested the abolishment of fiscal subventions in the budget for the year 2014, its work was made even more difficult. This alarmed government representatives, various cabinets and political parties more than it ever alarmed any foreign investors. On one hand, the budget that was adopted had no more subventions and also planned for the abolishment of SIEPA, but on the other – the message that subventions should be continued kept being sent to the public, as well as directly to some foreign investors.
During this whole time, Government never worked as a team. The agenda for any Government meeting was published only five minutes before the session starts. There is never any discussion at these meetings. The fear that Government members are feeling is obvious. They also have similar problems, but do not dare publicly speak about them.
Media lynch that I am a subject to in tabloids has grown out of proportion. From stories that I am a spy, false stories about drivers, lies about the amount of money I earned, up until the latest false news about my children on the front page of one tabloid. Media lynch is a part of media darkness which perpetuates fear. Self-censorship is on the unbelievably high level. This is a significant part of the mud we all belong to.
Today’s commissioned protest of trade unions of companies undergoing restructuring against the Law about Privatisation and Bankruptcy, as well as yesterday’s strikes and all union activities so far (for example, demonstratively leaving the Work Group and boycotting of public discussion about the Labor Law draft) were orchestrated by political parties, with the goal to stop reforms. They want to sustain the failed economic policy that we had for the past ten years, to keep their party and union privileges in the public sector – all of it at the expense of Serbian citizens. Irresponsible management of companies in this sector support them in that.
The Cabinet of the First Vice President of Government started seriously opposing these reforms in the beginning of December, when Ministry of Economy, after the public discussion, submitted its proposal of the Privatisation Law and changes of the Law about Bankruptcy to the Government of Serbia to be adopted. This giving up on reforms was a clear sign that elections are being planned. In late December it was obvious that it is due to the pressure of international institutions that these laws passed the Government and were sent to the Parliament, but during January, besides much written urging of the Ministry of Economy – emphasizing catastrophic consequences of failure to adopt these laws before elections – the Government did not schedule an urgent Parliament session that would discuss these laws. This is how reforms were practically stopped.
That the final abandonment of reforms and impending elections were due was clear at the sudden, informal meeting held on Monday, 20 January 2014, announced as ‘Collegium of Socio-Economic Council’ – something that neither the Law about Socio-Economic Council, nor the Standing Orders of this body recognize. This farce of commissioned meeting, coupled with commissioned union protests, aimed at creating an illusion that there exist a wide resistance to reforms.
On the same day that the mentioned meeting was held, Ministry of Labor was ready to submit the draft of the Labor Law – after all suggestions were received through the public discussion – to other ministries for their opinion. Talks with other unions were in progress, aiming to find a compromise, and their consent was expected before the end of this week. Without any cause, announcement or explanation, all these efforts were made redundant on Monday. It all happened without any consultations with the Ministry of Economy.
At this meeting, under the shadow of resistance against the draft of the Labor Law, the announcement was made that the Law about Privatisation and Bankruptcy, as well as two additional laws connected to it, and which already entered Parliament procedure and were unanimously adopted by the Government on 30 December 2013, will also be withdrawn. It is obvious that our society did not have enough of ‘Vršački vinogradi’, irresponsible managers and irresponsible state officials who are not working in the public interest.
It is more than clear that orchestrated union protest of small group of unions and party activists cannot be the reason for these laws not to be adopted, but only an excuse for the cover-up of the lack of political will and the wish to preserve the mud that we, as a society, keep rotting in.
Up until now, the Prime Minister of the Government did not present an obstacle to these reform activities. On the other hand, he did not provide any support either. The Prime Minister, who also seems to be under daily pressure of tabloids, did not show great interest for economic activities of the Government, nor did he deal with them. The main obstacle to all reforms was and still is the Cabinet of the First Vice President.
By abandoning the Law about Privatisation and Bankruptcy and two additional laws linked to it, the governing coalition showed great irresponsibility. If they have adopted these laws in December, instead of obstructing them, Privatisation Agency could submit their plan for financial restructuring of 10 companies in January, as was planned, and therefore not just fulfil their obligations towards the World Bank for the loan worth 250 million dollars, but these companies would have also been able to finish financial restructuring in February and then gain working capital from the Development Fund to finally start functioning on the healthy market bases. Even if these laws were adopted in January, it still would not have been too late. Instead, these problematic companies are convicted to further decline, while workers are left in greater uncertainty. Budget expense of this is great.
These laws, as well as the budget, planned for all owed salaries to be paid out in full at the minimal wage level, as well as conversion of claims above this amount into ownership of the company undergoing restructuring. Financial restructuring is also the final solution for all health-care ID cards for all employees. Without these laws, the part of the budget concerning Guarantee Fund and Venture Capital Industry creation for innovators cannot be implemented.
I consider this to be irresponsible behavior. Adoption of these laws and restructuring of companies in order for them to start functioning in a healthy way was the reason that I accepted to be part of this Government and, as part of the team, accept Government decision about bad fiscal consolidation measures, raise of taxes, lack of even plans of tax policy reform, tax administration, pension system, health system, education system, social care system, and to tolerate all obstructions and irresponsibility of public companies. This reason no longer exists. This is what makes my further stay in such a Government completely redundant.
Serbia has two possible paths before it. One is the path of the failed economic policy of subventions, corruption, employment along the party lines, tyranny of individuals, robbery under the name of privatisation, parasites who live on the back of society. The other is much harder path to travel, the path of responsibility, hard work, economic behavior, decency, institutions of the system. Enough is enough.
In Belgrade, 24 January 2014
Minister of Economy
Sasa Radulovic
Small correction: it’s “Belarusian”, not “Belorussian”.