“People only accept change in necessity and see necessity only in crisis.”
This weekend Greeks vote in a referendum whose outcome could have dramatic consequences for their country. Polls show that the result is on a knife-edge. Every vote counts. The stakes for Greece could not be higher.
Please find the full ESI newsletter on the Greek Referendum here:
“The truth is that the recession in Greece has little to do with an excessive debt burden. Until 2014, the country did not pay, in net terms, a single euro in interest: it borrowed enough from official sources at subsidized rates to pay 100% of its interest bill and then some. This situation supposedly changed a bit in 2014, the first year that the country made a small contribution to its interest bill, having run a primary surplus of barely 0.8% of GDP (or 0.5% of its debt of 170% of GDP).
To watch “One Step Ahead” (on the 2010 Thessaloniki elections) go here.
When the Syriza government fails this must not mean that the only alternative are the neo-Nazis of Golden Dawn.
There are pro-European and pro-reform Greeks who will make their voice heard. And there would be a huge reservoir of good-will across Europe for a Greek government that is serious about reforms, does not blame outside forces for its problems and really designs credible reform strategies to replace inchoate reforms proposed by foreigners.
Imagine the next Greek prime minister speaking like this, in Athens as well as in Berlin, in Thessaloniki as well as in Brussels, and also in Riga, Vilnius, Warsaw and Bratislava:
“As you all know Greece is going through an excruciating financial crisis. Under these conditions we need common sense …
… in Greece we are still hesitant to liberate the administration from the rule of the politicians. We are all embedded in a culture which resists the separation between politics and administration.
In the Greek state as a whole, this is the most important reform which is desperately needed. Unfortunately, in reality it has not advanced much.
The current system of a strikingly unreliable administration tends to reproduce itself. And this is clearly the responsibility of both the Greek government as well as of the EU since it hasn’t touched upon this during the last 34 years.
I dare to say that reforms and changes are not enough in the case of the Greek state. We need to revamp the state and its mentality almost from scratch! A new political culture needs to emerge in order to host a genuine separation of powers within the state.
The current institutional framework under which we operate is excessively centralist and any effort of decentralisation has proved to be inefficient. We are still unable to cooperate effectively with the private sector and increase our productivity. An inextricable web of laws determines the framework within which we are forced to operate.
The state needs to stop being hostile to its citizens. We need a government that will stop fooling citizens and proceeds immediately to some common sense action.
Greece is going through a crucial phase. After the biggest recession ever experienced by a developed country in the post-war period, people are in despair.
Political forces must form a united front on certain fundamental issues – like the state’s modernisation – and negotiate from a better position the country’s future.
The view that we can resort to excessive public spending in order to revive the prosperity of the past is not only surreal; it also ignores the current balance of power in our continent.
In order to distribute wealth you need to create favourable conditions in order to produce it. Unfortunately, there are too many Greek politicians suggesting that sustainable growth can come without radical reforms but in some magic way.
What Greece desperately needs, is radical transformation of its state which can in turn bring change to its political culture. This will be our task.”
PS: Note: this speech was actually delivered by a Greek politician in 2014. A politician who was elected on this platform in 2010 and reelected in 2014 in Greece’s second biggest city.
” … we have an obligation to act in order to preserve Greece’s stability and prosperity. This can only be attained within the Eurozone and the EU. In the unfortunate event that things will go astray, we should all unite and protect the people’s well-being from irresponsible political manoeuvring. Greece cannot afford to waste more time and consume itself in endless and irrational political conflict. I will do whatever I can in my power to avert this. If we manage to pass the dire straits of the immediate future, I am hopeful that our country will enter a phase of creative reform and sustainable growth. Greece has demonstrated in the past and Greeks have demonstrated abroad that if they work under decent conditions, they can definitely thrive.”
“NERP” sounds like “NERD”: may this contrast – or this photo – help you remember this particular acronym. NERP stands for National Economic Reform Programme. Last year the European Commission asked all Western Balkan governments to produce one NERP a year. (Proposed on page 8 here). The 2015 Kosovo NERP report is in fact different from the nerdish, impenetrable language of many economic analyses published on the Balkans in recent years. It deserves to be read widely.
The 2015 Kosovo NERP is 129 pages. Probably few people intend to read it in full. This would be a pity, as it provides a good foundation for a serious debate. In fact, the report hides its radical implications with its first sentence:
“Kosovo has been one of the very few countries in Europe and the region of South Eastern Europe that had positive growth rates in every single year in the period since the 2008 outbreak of the global financial crisis.”
This is not wrong, but it is misleading, as the analysis itself quickly makes clear. While everyone knows that Kosovo is poor, exports little, attracts little foreign investment and creates few jobs the NERP tell a far more disturbing story.
Kosovo’s problem in six figures
The 2015 Kosovo NERP contains many numbers, but some that are particularly telling. Between them, these six numbers tell you (almost) everything you need to know about Kosovo’s economy.
305 million Euros – the total value of goods Kosovo exported in 2013
An annual export number of 305 million Euro is abysmally low. For comparison: Estonia exported goods worth 12.3 billion Euros in 2013. Estonia has a much smaller population than Kosovo. It is also worrying that in 2013 two thirds of these exports were “base metal and mineral products.” This means there are barely 100 million Euro of other exports (food, vegetables, plastics) that produce added value. Kosovo extracts minerals from the earth and sells them – but it produces very little.
2.3 billion Euros – the total value of goods Kosovo imported in 2013
This is very high compared to Kosovo’s exports. So how is the gap financed? How do Kosovo importers obtain these 2.3 billion Euros to import goods? One must assume that they obtain much of this from Kosovars who earn this money abroad.
The level of imports is directly linked to the third number:
1.3 billion Euros – total revenues (income) of the Kosovo government in 2013. No less than 871 million of this comes from border taxes on imports
This means that the state – 70 percent of its total revenues – depend on imports taxed at the border (customs, excises, and VAT on imported goods).
To maintain the current level of public spending, imports need to remain at least as high as they are now. If less money is transferred to Kosovo by Kosovars abroad, for whatever reason, government revenues will contract quickly. Even if government revenues and spending are in balance (with a low government deficit), and even if the debt of Kosovo’s government is relatively low as a share of GDP, the structure of public finances is very fragile.
The fact that Kosovo produces few goods, which people outside of Kosovo (low exports) or inside Kosovo want to buy translates into tragically low numbers of jobs. Here is the fourth number:
220,000 people – registered as employed in 2013
There is sometimes confusion in public debates about “employment.” They frequently get mixed up with debates on the distinction between the official and unofficial (grey) economy. In fact it is simple: there are two ways to measure how many people work, which always give different results as the meaning of “employed” is different in each case.
The first way is to look at registered jobs. These are jobs which are known to public authorities and which are taxed. The second way is to do a representative survey of the labour force, based on samples. In the Kosovo Labour Force Survey (LFS), or any other such survey elsewhere, this is how “employment” is defined:
“People aged 15-64 years who during the reference week performed some work for wage or salary, or profit or family gain, in cash or in kind or were temporarily absent from their jobs.” (LFS 2013, page 7)
This includes anyone in the family of that age who works “for family gain” on their small plot of land, milks the cow, looks after vegetables during the reference week, even if nothing is then sold for cash. In a country with a lot of subsistence farming this number is always much higher than registered employment. In Kosovo in 2013 this number was 338,000 people.
These two figures of employment allow us to estimate the size of the Kosovo private sector. There are 77,000 jobs in the public sector (paid by the state). This leaves 143,000 jobs in the registered private sector. Then there are another 118,000 people “employed” (LFS) without being registered.
Even added together, this number is shockingly low. Kosovo’s resident population of 1.8 million people divides into some 297,000 households (the average household has 6 members, still the largest households in Europe today). Even including all employment (per LFS definition), and all subsistence family farming on tiny plots, this yields barely one “employed” per household.
No wonder only slightly more than one in ten women of working age in Kosovo are “employed” (even by the LFS definition). No wonder Kosovo households have few savings: every employed person has to support five other people (dependents).
(5) FOREIGN DIRECT INVESTMENT
All of this raises the key development question: will Kosovo businesses – existing or new ones – develop more competitive products for new markets in the coming years?
Gaining market share in export markets requires competing successfully against businesses from other countries, from the EU, the Balkans, Turkey. This requires investment, such as new machinery. New or expanding businesses in Kosovo can be either foreign (through FDI) or domestic.
Here is the fifth number:
241 million Euros – Foreign Direct Investment (FDI) in 2014
This is very low by any standards: it means that very few foreign companies show any interest in using Kosovo as a base for their production and transfer their machinery and know-how here. And, as the NERP notes, FDI has been decreasing in recent years:
“Since 2007, net FDI inflows have been volatile and with an overall negative trend … the sectorial composition of FDI has shifted towards real estate and construction between 2009 and 2013.”
What the NERP does not give us is the value of all cumulative FDI (the FDI stock) in Kosovo. For comparison: in Estonia in 2014 this FDI stock is around 15.9 billion Euro. Kosovo’s total GDP is only 5.3 billion Euro.
(6) COST OF CREDIT
The sixth number tells us what opportunities existing Kosovo entrepreneurs have if they want to develop:
10 percent – the annual interest rate on loans in November 2014 (in November 2013 it was 12 percent)
This is very high. Again, look at Estonia (European Central Bank data): loans to non-financial corporations – depending on specific conditions – carry around 3 percent annual interest at the end of 2014.
What do these six numbers tell us about the Kosovo economy?
Export of goods is very low; given current trends of declining FDI and high costs of borrowing for businesses in Kosovo this is unlikely to change anytime soon. The NERP projects a best case scenario in which the export of goods increases from 305 million Euro to 441 million Euroby 2017.
There is little structural change in the Kosovo economy compared to one decade ago. The GDP growth that has happened has been the result of households spending money (consumption) based on transfers from abroad and increases in public sector salaries (funded largely through border taxes on imports of goods, which are bought largely with money transferred from abroad).
The employment rate will remain very low in the foreseeable future. If new jobs are created in the next years in the private sector one might expect some subsistence farmers to turn away from non-cash production to other – regular – employment. In order to really increase employment rates and create new jobs Kosovo would need levels of investment and export growth that are simply not on the horizon for many years to come.
This makes public policy in many areas hard to formulate. Take the issue of skills needed for the labour market. What jobs does today’s generation of young Kosovars need to be prepared to take? What skills will they need? Unless there is a realistic job of more jobs in the foreseeable future this question is impossible to answer.
All of this is well set out in the NERP. At the same time it also underlines the main gap in the NERP analysis: the absence of any analysis of the economic impact of current and future migration flows.
While the word remittances appears many times, “migration” does not appear anywhere in the text. At the same time everything described in the NERP – the huge trade deficit, a public sector funded to 70 percent by border taxes, recent GDP growth – is the direct consequence of the migration that took place many years ago. There is no discussion of what policies – education, social and foreign policy – might make regular migration from Kosovo to the EU possible. This created the lifeline of remittances that keeps Kosovo households – and the public sector – afloat today. This is the lifeline that the EU has tried to cut since 1999, making it increasingly difficult for Kosovars to migrate to work.
“Promotion of Kosovo Diaspora and realization of objectives arising from Strategy on Diaspora and Migration 2013-2018, which is related to the preservation of national and cultural identity of Diaspora, to creation of conditions for the participation of Diaspora in the political and social life and their representation in decision-making institutions of the country, integrating them in countries where they live, as well as involvement of Diaspora in socioeconomic development of the country.“
This half sentence is not followed by any concrete policy measure.
The pressure on Kosovars to look (legally or illegally) for work and income elsewhere will grow ever stronger in coming years. How strong this pressure is already has recently become obvious to policy makers in the EU and in Kosovo.
ESI argues that the European Union, instead of simply opposing this pressure, should try to channel it in mutually beneficial ways. Illegal and irregular migration needs to be stopped, but opportunities for regular, or circular work migration need to be opened. This will also require a major effort on the part of Kosovo authorities in many policy fields, starting in education policy.
The first paragraph of the NERP euphemistically refers to “the country’s rather specific development model.”What is today specific about this model is that it is not about development in Kosovo at all. As the NERP notes, Kosovo experienced growth:
“… based on strong remittances and FDI inflows from diaspora that boost domestic demand through household consumption and investments channelled primarily into the non-tradable sector, such as real estate and services.”
This is growth dependent on wage earners in Germany, Switzerland or Austria with links to family members resident in Kosovo. The NERP refers to some risks:
“The existing growth model of the country based on large financial inflows is associated with significant risks. On the short run, the main risk factor would be a sudden fall of these inflows – caused by unfavourable economic developments in countries with the largest Kosovo diaspora – and its negative consequences for growth, public finances, and external and financial sector stability.”
But then it falls silent. It does not discuss the role of EU policies that try to prevent further migration.
Young Europeans – but not part of Europe today
The NERP is an interesting document. More will be said on this blog later on its recommendations to increase exports. But the main value of the NERP lies in showing what many prefer to forget: while migration alone is no development policy, without migration Kosovo has no medium term economic future. Simply put:
The Kosovo “growth model”
Workers abroad, with family in Kosovo
Money that fuels local consumption. This funds imports. Taxation of these imports is the core of public revenues
EU member state policy
STOP Kosovars moving abroad to work illegally
CLOSE most possibilities to move to work abroad legally
Greatest risk to Kosovo “growth model”
Current EU member state policy succeeding.
In order to develop a credible migration policy, the vital importance of migration needs to be acknowledged first, including in the NERP. It is never too late.
 The definition of FDI according to the World Bank: “Foreign direct investment are the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.”
They are the two most memorable words for texts that are best forgotten: Gibberish and Gobbledygook.
“Gibberish or gobbledygook refer to speech or other use of language that is nonsense, or that appears to be nonsense. It may include speech sounds that are not actual words, or forms such as language games or highly specialized jargon that seems nonsensical to outsiders.” (Wikipedia)
As Glenn Seaborg explained one theory in 1980 in “Our heritage of the elements”:
“… gibberish comes from the name of the famous 8th-century Islamic alchemist Jābir ibn Hayyān, whose name was Latinized as “Geber”, thus the term “gibberish” arose as a reference to the incomprehensible technical jargon often used by Jabir and other alchemists who followed.”
Jabir ibn Hayyan alias Geber
There is no particular reason why texts about economic development should be either gibberish or gobbledygook. And yet, quite a lot of what was written by the European Commission on the economic development in the Balkans in recent years might qualify.
“The economic upturn throughout 2013 and the first quarter of 2014 came abruptly to a halt in the second quarter of 2014 mainly as a result of the heavy spring floods. Accordingly, GDP growth slipped into a negative territory by 0.5% y-o-y after expanding by 3.2% in the previous quarter. Going further, preliminary data for the third quarter released by the statistical agency indicate GDP growth to have marginally turned positive (0.6% y-o-y). Similarly, high-frequency indicators for July-October 2014 point towards a modest revival of economic activity with the country-wide industrial production up by 1% yo-y, before turning negative again in November. In particular, the mining and quarrying sector as well as the utility sector registered the largest output contraction y-o-y, -1% and 10.7%, respectively, while the manufacturing sector posted the largest output increase (4.4%). The slump of domestic demand in the second quarter of 2014 started to reverse in July September with the growth of retail sales speeding up by 2.1% y-o-y and even accelerate in October-November to 7.8% y-o-y, well above the expansion of 4.6% in 2013.”
Already at first glance this breaks the basic rule of writing well: the writer is making the reader work too hard.
At second glance, once one begins to analyse this paragraph, it turns out that its meaning is elusive … or, in plain language, this makes little sense. Read this once, twice, three times, and then ask yourself: what has been happening in the Bosnian real sector in 2014, compared to 2013? There was a flood, and the economy suffered: but what do all these quarterly variations add up to? (Note that this paragraph is all the quarterly report tells the reader about the Bosnian real sector in late 2014.)
“Consumer prices started declining in December 2014 (-0.5% y/y) and continued on a downward trajectory by February (-0.2% y/y). The decline in the price index was almost completely influenced by decreasing prices of transport and education. On the other hand, 65.7% of the CPI components have actually been increasing; most notably food 2.1% y/y, energy 7.4% y/y etc.”
The reader understands that 65.7 percent of the prices of the components of the Consumer Price Index (CPI) have increased (one assumes in February), and (one assumes) 34.3 percent of the prices have not. One learns that there have been (monthly) decreases in the “prices of education” in January and February 2015, though what that means is elusive. There is no explanation which costs of education are included in the Consumer Price Index. Or why any of this matters and to whom. And what the etc. at the end refers to.
The economic sections of progress reports, which the European Commission publishes every autumn to evaluate accession countries, have also been written by ECFIN. The following paragraph is from the 2013 annual report on Macedonia. It invites readers to meditate on the meaning of words and numbers:
“Fiscal discipline was relaxed in 2012, and the quality of public spending deteriorated further. The general government budget deficit reached 3.8%, thus overshooting even the revised deficit target, which the authorities had raised by 1 percentage point to 3.5% in autumn. Another budget rebalancing reduced mainly investment spending, due to severe revenue shortfalls. Total expenditure as share of GDP rose from 31% in 2011 to 34% in 2012, and is estimated to reach 35% in 2013. The primary government budget deficit rose to 3.1% of GDP in 2012, compared to 1.7% in 2011. Capital spending was almost unchanged in 2012 compared to 2011, at 12% of total expenditure, or just over 4% of GDP, projected to decline to 11.3% of total expenditure in 2013, or 3.9% of GDP. The share of social transfers in total expenditure declined slightly in 2012, to 44.7% from 45.2% a year earlier, and is projected to stay largely unchanged in 2013. As a share of GDP, social transfers increased somewhat, to 15% of GDP, up by 0.4 percentage points.”
This creates an illusion of meaning. The reader is offered fourteen facts:
General government deficit target (2012)
Revised general government deficit target (2012)
Actual general government deficit (2012)
2.5 per cent
Total expenditure as share of GDP (2011)
Total expenditure as share of GDP (2012)
Total expenditure as share of GDP (2013 expected)
Primary government budget deficit (2011)
Primary government budget deficit (2012)
Capital spending as share of total spending (2011)
Capital spending as share of total spending (2012)
Capital spending as share of total spending (2013)
12 percent (4 percent of GDP)
11.3 percent (3.9 percent of GDP)
Social transfers in total expenditure (2011)
Social transfers in total expenditure (2012)
Social transfers in total expenditure (2013 projected)
What does all of this mean? The reader learns that
Fiscal discipline was relaxed and that “the general government deficit grew more than expected”; (two ways to say the same thing)
The reason for this: a severe revenue shortfall.
In response to this shortfall the government REDUCED investment spending but “capital spending was unchanged.”
Meanwhile total government expenditure ROSE.
And the share of social transfers in expenditure DECLINED.
So what actually happened in Macedonia?
The government did not collect as many revenues as it had planned. It then reduced investment spending. Social transfers declined as a share of expenditure. Total government expenditure rose. What type of spending increase explains the remarkable increase (by 3 per cent of total GDP!) in government spending? On this, there is nothing. We learn that the “quality of public spending deteriorated further,” a point that is never explained.
Lucid writing on economics
During such meetings I also quoted positive examples of good writing. Oxford professor and FT columnist John Kay on markets. My friend Felix Martin on money. The Dutch Central Bank, describing the “faltering Dutch economy” in its 2012 annual report (page 15). You do not need a PhD in economics to understand the annual reports by the European Central Bank either:
“The economic and financial crisis has reduced euro area potential output via two main channels: lower investment and higher structural unemployment.
First, during the most severe phase of the crisis, investment rates declined considerably, with financing conditions, such as terms and availability of credit, worsening in particular. Increased economic and political uncertainty and an unfavourable economic outlook made it more difficult to assess investment projects and lowered the expected rate of return on investments. High indebtedness of non-financial corporations in some euro area countries also made deleveraging necessary, further reducing credit demand.
Second, the crisis has also led to an increase in short to medium-term structural unemployment rates, indicated by the rise in long-term unemployment and an increase in skill mismatches. The unemployment rate of low-skilled workers has increased more than that of high-skilled workers, largely because the crisis triggered a sectoral relocation in many euro area economies, in particular a shift away from the construction sector. As it may be difficult for low-skilled workers dismissed from one sector to find jobs in other sectors, and as their human capital progressively erodes with the duration of unemployment, structural unemployment rates may remain elevated for an extended period.”
(ECB, 2014 Annual Report, page 23).
Fortunately, during 2014 awareness of the problem posed by unclear writing on economic trends has increased in many EU policy circles. There is good reason to expect that future writing by the European Commission (and ECFIN) on the economies of accession countries will be less impenetrable. (It may also be worth considering a thorough reform – or even a discontinuation – of these quarterly reports: http://ec.europa.eu/economy_finance/db_indicators/cpaceq/index_en.htm)
PS: To add one useful example when it comes to writing about economic trends in the Balkans – certainly for the economic section in the next Kosovo progress report of the European Commission – look here:2015 Kosovo NERP.
Every organisation that is around for long enough develops its own jargon. One question that we in ESI ask ourselves often is whether a given draft “can be understood by a perceptive fourteen-year-old.” Does it meet the fourteen-year-old test?
The logic behind this is simple: whether we write about the Bosnian constitution, rural poverty, election monitoring, the furniture business in Turkey or the European statistical system, we try to communicate with people from many countries with different backgrounds. We imagine a group of readers consisting of a Bosnian minister, a Turkish journalist, an Italian diplomat and an American NGO activist. We assume that our readers are experts in their fields, experienced and pressed for time. We do, however, assume that they are as impatient with bad writing as we are.
A literate and curious fourteen-year-old already knows a lot about the world and is eager to learn more every day. What she is not yet familiar with is the jargon in any field. She is also likely to ask what a certain concept actually means when it is first encountered, whether “human capital”, “free and fair elections”, a “functioning market economy” or “annual GDP growth.” Or what the purpose of any text or discipline is.
Marc Bloch – great writer
In his book The Historian’s Craft Marc Bloch, one of the greatest historians of the twentieth century, put himself in the position of a father asked by his child: “What is the use of history?” And then he sets out to answer this simple but certainly not childish question in a book written while he was already part of the French resistance in 1942. (He was later arrested and shot by the Gestapo).
When the stakes are real, there is no time for any but important questions to be addressed. And to always aim, even if one falls short, for the elegance and simplicity of masters like Bloch.
To write in “Fourteenish” is thus to write for a broad audience of concerned readers; eager to learn but impatient; for readers interested in a wide variety of issues on which they cannot always be experts; for readers who always ask: “What is the point?”
As William Zinsser put it in his classic On Writing Well – required reading for anybody drafting policy papers – “writers must therefore constantly ask: what am I trying to say?” And writers must remember:
“In terms of craft, there’s no excuse for losing readers through sloppy workmanship. If they doze off in the middle of your article, because you have been careless about a technical detail, the fault is yours.”
One of the ambitions of this blog is to begin to “translate” policy papers on different issues, in particular texts on economic development and EU policy, into Fourteenish.
PS: If you come across any text – a policy paper or an academic report – which you believe deserves to be held up as an example of a particularly badly or well written text, please send it to email@example.com.
The Gimnasio moderno is one of the oldest schools in Bogota. It was also the site of a remarkable historical event: in April 1948 this school hosted the meeting of continental foreign ministers – including US secretary of state George Marshall – that led to the creation of the Organisation of American States (OAS).
During that meeting delegates from the Americas approved the “American Declaration of the Rights and Duties of Man” – the first intergovernmental declaration of human rights in history. It included many progressive provisions, including this article:
“Every accused person is presumed to be innocent until proved guilty. Every person accused of an offense has the right to be given an impartial and public hearing, and to be tried by courts previously established in accordance with pre- existing laws, and not to receive cruel, infamous or unusual punishment.”
This declaration predated the Universal Declaration of Human Rights (adopted in Paris in December 1948) and the European Convention of Human Rights (opened for signature in Rome’s Palazzo Barberini in 1950).
And yet, last Sunday I looked in vain for any sign near the school to commemorate this historic event. Perhaps a little campaign in Colombia might change that?
PS: The fate of this American Declaration and its aspirations is also an antidote to any complacency about history and human rights. While the declaration was adopted Bogota was in the throes of violence, following the assassination of an opposition leader. A third of Bogota was destroyed during the clashes – this is why delegates moved from the center to this school to adopt the declaration! Years of deadly civil strife – la violencia – followed.
Within a few years, following 1948, a new wave of autocratic restoration swept across Latin America. By the mid 1970s most of the countries in South America were either in civil conflict (Colombia again) or ruled by brutal dictatorships. It took until 1978 for the American Convention on Human Rights to enter into force. It took much longer for basic human rights – such as the prohibition of torture – to be taken seriously across Latin America.
Today this declaration is considered by both the Inter-American Court of Human Rights and the Inter-American Commission on Human Rights to be a source of binding international obligations for OAS’s member states … including for Cuba and the United States!
Outside the Gimnasio Moderno with Kathryn Sikkink from Harvard
The Government Building of Tuzla Canton burning, 7 February 2014. Photo: Wikimedia Commons/Juniki San
Recent years have seen many small and peaceful protests. The violent protest in Bosnia which made international headlines earlier this year in February was an exception, not the rule.
The impression that Bosnian society is passive and Bosnians are indifferent to what is happening around them is wrong. Take a look at the list below. It is only some information on protests ESI has collected for the last three weeks – 1 to 21 December 2014. It offers an interesting insight into politics in Bosnia at the end of this year, and at the end of a lost decade.
It is noteworthy that protestors direct their energy at the levels of government that matter most to them: these are the cantons (in the Federation), Republika Srpska and Brcko District. This is an important signal to all those, including the European Commission, who work with Bosnian authorities on recommendations for reforms. It simply makes no sense not to closely involve the levels of government that are at the centre of citizens’ expectations and frustrations. The same is true for the international financial institutions such as the World Bank, studying challenges to Bosnian development. The future of Bosnian reforms will be decided in Tuzla, Zenica and Bihac as much as in Sarajevo.
Hot December? Reports in Bosnian media on threats, protests and strikes 1 to 21 December 2014
Will protests change policy, though? If protests are directed at things which politicians cannot actually change – or at the very system of representative democracy – then they condemn themselves to impotence. Only parliamentary majorities can change laws. Only elected leaders can change policy.
On theme that runs through the news is lack of financial resources. Note that on 3 December 2014, Brcko, mayor of Brcko District announced that Brcko is faced with financial difficulties due to the collapse of Bobar bank. Brcko deposited around 10 million euros in Bobar bank. There is similar news from across the country. On 7 December 2014, Trebinje, mayor of Trebinje announced that the city could go bankrupt because it had around 2.5 million euros of its budget deposited in collapsed Bobar bank.
The key question that will determine whether protests change anything is what people expect from them and call for. If it is only some interest groups – former workers of socialist companies or war veterans – demanding redistribution of public spending to their benefit few politicians will be able to satisfy them. However, if protests can be harnessed to support specific changes, less waste, and more transparency then they could become the wind filling sails of reform.
Reasons for protests and strikes – Media to 21 December 2014
War related topics
received from budget
Bad working conditions
Here is a selection of available reports in Bosnian media for the period from 1 to 21 December 2014 on threats of possible and actual protests. The list is not exhausted.
1 December 2014, Tuzla, group of workers of several big companies in Tuzla gathered and blocked traffic in front of the building where the first session of new cantonal assembly was held.
2 December 2014, Zenica, organization Eko forum announced it would organize protests because of increasing air pollution in Zenica and little or no effort on side of municipality and canton to prevent pollution or punish polluters.
3 December 2014, Tuzla, workers of several companies gathered in front of the prosecutor’s office and the court to remind about criminal privatization of their factories and pending cases against alleged perpetuators.
4 December 2014, Banja Luka, a group of small owners of Fruktona factory protested in front of the factory and demanded from the entity government to stop factory’s bankruptcy.
5 December 2014, Istocno Sarajevo, around 100 workers in the Istocno Sarajevo general hospital protested because their salaries were late, because benefits were not paid for several months and because of the working conditions.
5 December 2014, Bihac, around 200 workers of BIRA factory of cooling equipment who were fired recently protested in front of the factory and demanded from the owners to register them at the unemployed office in order to be able to make use of health insurance.
5 December 2014, Visegrad, organization of war veterans of Republika Srpska organized protests because of arrests of 15 war veterans from Visegrad on account of war crimes.
6 December 2014, Srbac, 11 workers in a local cultural center of Srbac warned that they would go into general strike because of poor working conditions, pending salaries and social and health benefits.
7 December 2014, Gorazde, former cantonal minister, who resigned in June 2011 following the disagreement with then cantonal prime minister, announced that she was preparing a public exhibition of 47 job rejections in the local, cantonal, entity and state administration she received since her resignation.
8 December 2014, Istocno Sarajevo, around 100 workers in the Istocno Sarajevo general hospital protested because their salaries were late, because benefits were not paid for several months and because of the working conditions.
8 December 2014, Zenica, representatives of students who receive scholarships as children of war veterans met with the cantonal prime minister to demand payment of three pending benefits.
8 December 2014, Sarajevo, workers of a company in charge for management of the sporting arenas built during the 1984 Winter Olympics continued their protests because of pending salaries and announced cuts of 33 jobs.
9 December 2014, Ilijas, teachers in local schools go into 30 minutes long strike because of unpaid transportation costs.
9 December 2014, Tuzla, representatives of the Union of those receiving their salaries from cantonal budget announced mass protests if the government doesn’t retract its decision to cut all budget dependent salaries for 10%.
9 December 2014, Banja Luka, representative of union of medical doctors threatened with general strike if demands of those working in Istocno Sarajevo general hospital are not met.
9 December 2014, Sokolac, workers of company Nova Romanija announced they would start a legal procedure against government of Republika Srpska because of pending 10 salaries from 2014.
9 December 2014, Sarajevo, representatives of farmers from entire Bosnia demand a meeting with the presidency to explain them all the problems they have.
9 December 2014, Bileca, workers in textile factory Nikola Tesla protested because of two pending salaries.
9 December 2014, Sarajevo and Geneva, around 50 out of 15.000 citizens of Bosnia who worked before the war in Croatia and were left without benefits (pension) started their trip to Geneva where they protested in front of the UN building on occasion of the human rights day (10 December).
10 December 2014, Sarajevo, members of families of missing persons from the 1992 to 1995 war in Bosnia protested in the city centre and demanded that all governments do more on finding their missing ones.
10 December, Banja Luka, three of TRZ Bratunac company protested in front of the entity industry ministry because they rejected to sign a contract with management of their company on arrangement for payment of pending salaries.
10 December 2014, Tuzla, a small group of former and current workers of state owned shoe factory Aida protested in front of the factory. They demanded from cantonal government to provide them with unemployed one-time support in amount of 200 euros, to provide funding for missing contributions to the pension fund and help repay 10 million euros of debt that the factory has.
10 December 2014, Sarajevo, survivors of concentration camps from the 1992 to 1995 war in Bosnia gathered in the city center to warn about their bad legal and economic situation.
10 December 2014, Zenica, students of the University of Zenica announced that they would start to protest if three pending cantonal scholarships for children of war veterans were not paid.
10 December 2014, Tuzla, around 300 workers of nine companies announced that they will protests if cantonal government doesn’t provide them with agreed one time help in amount of 200 euros.
11 December 2014, Zenica and Bihac, according to the statements of directors of general hospitals in Zenica and Bihac, two hospitals are close to being closed. The hospital in Zenica had to restrict its work to urgent surgeries and was forced to cut down parts of its heating system. Bihac general hospital could close down because it has a debt of 3.5 million euros and cantonal health fund rejected to vouch for further loans for this hospital.
11 December, Banja Luka, three of TRZ Bratunac protested in front of the entity industry ministry because they rejected to sign a contract with management of their company on arrangement for payment of pending salaries.
11 December 2014, Zenica, miners in pit Stranjani rejected to come out of the pit after their shift was over and put forward demands towards a company run by the Federation regarding unpaid benefits and working conditions. Following the meeting with the management protests ended.
11 December 2014, Tuzla, decision of cantonal government to put out of force decision on reducing all salaries for 10% as of January 2015 prevented mass protests of those receiving salaries from budget.
11 December 2014, Tuzla, association of “Mothers of Srebrenica” protested in front of the state investigative agency SIPA regional office in Tuzla because one of its employees took part in Srebrenica atrocities in July 1995.
11 December 2014, Istocno Sarajevo, around 100 workers in the Istocno Sarajevo general hospital protested because their salaries were late, because benefits were not paid for several months and because of the working conditions.
12 December 2014, Teslic, management and workers of a private textile factory Neno threatened with protests because company’s bank account has been blocked due to collapse of Bobar bank.
12 December 2014, Brcko, families of missing Serbs from the 1992 to 1995 Bosnian war protested in front of the Brcko District prosecutor’s office because of pending missing person’s cases.
12 December 2014, Siroki Brijeg, around 100 former and current workers of private meat factory Lijanovici protested in front of the factory and claimed that they haven’t received salaries for 16 months and that the owners did not make contribution for workers pensions for 12 years.
13 December 2014, Banja Luka, three workers of TRZ Bratunac protested in front of the entity industry ministry because they rejected to sign a contract with management of their company on arrangement for payment of pending salaries. The minister talked with them and they stopped their protests.
15 December 2014, Zenica, a group o 50 young mothers with their babies protested in front of the cantonal government because they haven’t received child support for four months.
15 December 2014, Tuzla, around 100 former and current workers of state owned shoe factory Aida protested in front of the factory and blocked the city’s main road. Workers of Aida demanded from cantonal government to provide them with unemployed one-time support in amount of 200 euros, to provide funding for missing contributions to the pension fund and help repay 10 million euros of debt that the factory has.
15 December 2014, Sarajevo, union of railway workers of the Federation publicly demanded from the Federation government to solve the problem of health insurance for workers of the Federation Railways who live in Mostar and Sarajevo canton and those who live in Brcko District and Repubika Srpska.
15 December 2014, Bihac, around 200 workers of BIRA factory of cooling equipment who were recently fired protested in front of the factory and demanded from the owners to register them at the unemployed office in order to be able to make use of health insurance.
15 December 2014, Istocno Sarajevo, around 100 workers in the Istocno Sarajevo general hospital protested because their salaries were late, because benefits were not paid for several months and because of the working conditions.
15 December 2014, Siroki Brijeg, around 100 former and current workers of private meat factory Lijanovici protested in front of the factory and claimed that they haven’t received salaries for 16 months and that the owners did not make contribution for workers pensions for 12 years.
16 December 2014, Bihac, general hospital warns that it could close due to unpaid contribution by the cantonal health fund in amount of 3.5 million euros.
16 December 2014, Siroki Brijeg, around 100 former and current workers of private meat factory Lijanovici announced that they would sleep in front of the factory and the house of its owner Jerko Lijanovic (who is from 2011 deputy prime minister and minister of agriculture in the government of the federation). The protestors claim that they haven’t received salaries for 16 months and that the owners did not make contribution for workers pensions for 12 years.
16 December 2014, Tuzla, around 100 former and current workers of state owned shoe factory Aida ended their protests without success. Workers of Aida demanded from cantonal government to provide them with a one-time support in amount of 200 euros, to provide funding for missing contributions to the pension fund and help repay 10 million euros of debt that the factory has.
16 December 2014, Sarajevo, around 20 workers of privatized Feroelektro trading company gathered in front of the Federation government building demanding support for workers who haven’t received 29 salaries and their social benefits were not paid (health insurance and pension contribution) and demanded to speed up the process at the cantonal court regarding the alleged wrongdoing during the privatization process which could lead to annulation of privatization contract and return of the company to the state.
16 December 2014, Sarajevo, around 4.000 unemployed persons in canton Sarajevo warned on possibility that they will go to the streets if the cantonal government implements decision to delete from the list all unemployed who earned more than 104 euros per month.
16 December 2014, Zenica, following a meeting with the cantonal prime minister some 50 young mothers ended their protests which started because they haven’t received child support for four months. The prime minister explained that the government is experiencing problems with the filling of budget but he hopes that the money from IMF would solve this.
16 December 2014, Sarajevo, union of teachers in canton Sarajevo held a 30 minutes protest because their November salary was late and because their transport costs haven’t been paid for 9 months.
17 December 2014, Bihac, thousand members of the cantonal union of persons receiving salaries from cantonal budget protested because the cantonal government did not fulfill the agreement about paying pending payments.
17 December 2014, Srbac, 11 workers in a local cultural center of Srbac started their general strike because of poor working conditions, pending salaries and pending social and health benefits.
17 December 2014, Sarajevo, workers in Sarajevotekstil textile company protest because their salaries and benefits have not been paid due to company’s blocked bank account.
17 December 2014, Lokanje, residents of a small village of Lokanje in eastern Bosnia (Republika Srpska) demonstrated against arrests of their fellow citizens who were indicted for war crimes.
18 December 2014, Sarajevo, workers in Sarajevotekstil textile company protest because their salaries and benefits have not been paid due to company’s blocked bank account.
18 December 2014, Sarajevo, coalition of civic organizations gathered in front of the state parliament to deliver 78 demands/policy recommendations for the period from 2014 to 2018 regarding EU integration process, human and minority rights.
18 December 2014, Brcko, Milenko Gojkovic, victim of May flooding started a hunger strike because authorities rejected to provide financial assistance for rebuilding of his home.
19 December 2014, Derventa, workers in factory Unis demonstrated in front of their factory demanding payment of pending salaries from December 2013 and restart of production.
19 December 2014, Banja Luka, union of textile workers sends a protest letter to the council of ministers at the state level demanding adoption of measures that would protect their production.
21 December 2014, Zenica, 300 citizens protest because of the air pollution in the city. Protestors demand lowering of pollution and prosecution of air polluter.
“Straight out, the only reason why I ultimately decided to invest in Georgia is because the country undertook many of the reforms suggested by Doing Business.” (Hans Gutbrod)
A few weeks ago we wrote about the 2015 World Bank Doing Business survey: Pumpkins, outliers and the Doing Business illusion (4 November 2014). We looked in particular at countries we know well, Georgia and Macedonia, and at their astonishing rise through these rankings:
“In January 2013, one of Germany’s leading papers, FAZ, wrote a long article about our analysis on Georgia. And we set out to take a closer look at Macedonia. We focused on these two amazing results: how it was possible for Georgia to have a better business climate than Germany – not only for one year, but in consecutive reports, year after year – and how Macedonia managed to beat Switzerland.”
We also examined how the aggregate position in these rankings is generated. And we concluded:
“Overselling Doing Business can do harm, if it suggests that the key problems facing a country like Macedonia are easy to identify and to address without any real understanding of local comparative advantages or disadvantages, of existing businesses and industrial legacies. Doing Business authors argued that their research “defies the often used saying, ‘one size doesn’t fit all.'” This implies that it is straightforward both to diagnose the illness and to prescribe the right medicine. It remains true today, as it was in 2004, that Georgia and Macedonia have much more to learn from Germany and Switzerland (or Poland and Slovakia, countries in “Danubia”) than vice versa.
We started by noting that rankings are both useful and inescapable. This means that their authors have a responsibility to present the findings in such reports in a sober way. Here the Doing Business report still has some way to go.”
This is an important debate, all the more because rankings are inescapable. So we invited some experts we highly respect, who understand the region we discuss and the way the World Bank works, to comment on our findings, in order to launch a wider debate on the future of rankings in general and on Doing Business in particular.
The series starts with Hans Gutbrod, who has worked as a regional director for the Caucasus Research Resource Centers (CRRC), covering Armenia, Azerbaijan and Georgia. With CRRC, Hans has occasionally worked for World Bank projects, among 30+ other donors. He was not involved with Doing Business, and is not working on World Bank projects at this point. Next to working in policy research and on transparency issues, he co-founded an agriculture company in Western Georgia in 2009. Hans holds a Ph.D. in International Relations from the London School of Economics.
If you are interested to contribute to this debate, please write to me on firstname.lastname@example.org.
Doing Business: The Path out of Kleptocracy – a response by Hans Gutbrod
The recent publication of the Doing Business report by the World Bank brought a new round of debate on the value of these rankings. As in recent years, critics have pointed out a number of methodological concerns, as has the European Stability Initiative. From my point of view, these criticisms are mostly misplaced. I think that I bring a perspective that can add to the debate: for more than six years, I ran a research organization doing many dozens of projects across the Caucasus and beyond. This research often grappled with how to quantify economic, political and social change. Together with colleagues, I have also set up rating systems that have received some degree of attention. Moreover, for more than five years I have been active in business in Georgia, setting up, with two Georgian colleagues, one of the first larger-scale export-oriented agriculture ventures. In other words, I have an understanding of social science methodology — and I have actually been doing business.
Straight out, the only reason why I ultimately decided to invest in Georgia is because the country undertook many of the reforms suggested by Doing Business. It’s easy to set up a company, the tax structure is clear, we have been fully compliant, and in an environment of significant political and geopolitical risks, we do not have to worry about cumbersome or predatory regulation. The flexibility of the labor code matters, too. It is so desperately difficult to make things work in these environments that — unless you have huge amounts of money, which I do not — you should be able to hire people quickly, without adding long-term cost burdens. We want our workers to commit, so we pay them a good salary. Our salaries are very significantly above minimum wage, for work that can be done in combination with other jobs. I am not saying that all businessmen take this approach. Yet the idea that little labor legislation automatically implies exploitation does not make sense, from my perspective. You get good work by paying a fair wage.
Small tweaks matter, too. Georgia allows its notaries to do transactions via Skype. If, prior to this reform, you have ever chased around Ottawa in a Canadian winter to get a permission to apply for water rights notarized (notary), apostilled (Department for Foreign Affairs and International Trade), verified (local Georgian Embassy), and then shipped (DHL, at the cost of an expensive dinner for two) you will learn to value the kinds of reforms that Georgia undertook. Doing Business indeed highlighted that Georgia went on the right track.
Are the Doing Business indicators sufficient? No, of course not. But they are necessary. Let me unpack that argument: under the very government that undertook a number of excellent reforms, we were worried about heavy-handed tax police and about unchecked rogue elements in the Ministry of Internal Affairs. These excesses were not fully reflected by the Doing Business rankings. It is seen as a weakness of Doing Business that it does not fully account for such realities. At the same time, is this a fair criticism? Doing Business sells itself as focusing on the kind of business regulation that serves as an instrument for obstructing (and usually fleecing) entrepreneurs. Doing Business fulfills on that promise. Yet of course this angle only captures one aspect of the total business environment. It is, however, a critical angle, without which only the very rich, or the very well-connected, can get things done.
Doing Business has another desirable feature, one that is also the subject of criticism that ultimately is shortsighted. Doing Business creates many winners, in that it marks progress according to different categories. In that way, Georgia can do better than Germany, and Azerbaijan, otherwise not exactly a role model of reform, can also make progress. That is, of course, a sacrifice of rigor, but conversely an excellent application of research (or parental experience): if you want change, creating winners is an attractive strategy.
From what I have seen over the years, Doing Business is one of the best tools that the World Bank has come up with. It is extraordinarily powerful, in pointing in a direction that helps the world move away from kleptocracy. Not everyone in the World Bank is happy about this success, as departments that have not invented Doing Business want more attention for the concerns that they are seeking to advance. From their perspective, the methodological shortfalls of Doing Business are particularly glaring. And these concerns are relevant: it is likely that some (small) improvements to Doing Business are possible. Yet in this discussion, let’s keep the big picture in mind.
Doing Business helps to advance an important cause. If people have an even better system, it would be great to hear about it and to have spelled out how it works. But let’s understand all that Doing Business does before getting stuck on what finally are marginal quibbles. Actually doing business is not just about academic rigor, it is about creating opportunity and jobs in tough environments where those typically are in short supply.