Gjëja e parë e rëndësishme të ceket për NERP-in është se ai nuk është i stërmbushur me zhargon. Përkundrazi, ky është një dokument i qartë dhe i kuptueshëm në tërësi.
Krejt ajo qartësi e ekspozon gjënë e dytë të rëndësishme që përmban dokumenti: pasqyrën jashtëzakonisht të errët ekonomike e Kosovës.
Vitin e kaluar, Komisioni Evropian (KE) kërkoi nga të gjitha qeveritë e Ballkanit Perendimor të prodhojnë nga një NERP në vit. (Shih këtu – vetëm në gjuhën angleze). NERP-i i Kosovës (2015) ka 129 faqe – që do të thotë se është dokument i gjatë që për fat të keq rrallëkush do ta lexojë deri në fund. Themi “për fat të keq” sepse NERP përmban detaje shokuese për ekonominë e Kosovës që do të përbënte një bazë të mirë për debat serioz për të ardhmën ekonomike të Kosovës.
Në të njejtën kohë, NERP-i dështon ta përmend një çështje kryesore që përfshihet në analizë po që nuk përmendet: migrimin – ngaqë migrimi vazhdon të mbetet çështje tabu për politik-bërësit.
Por, t’ia nisim nga fillimi. Fjalia e parë:
“Kosova është ndër vendet e vetme në Evropen Jug Lindore që ka patur rritje të vazhdueshme ekonomike çdo vit në periudhën prej shpërthimit të krizës financiare globale në 2008.”
Kjo fjali nuk është gabim por krijon përshtypje të rrejshme për atë se çka po ndodhë në ekonominë e Kosovës, siç tregon edhe vetë analiza e NERP-it e përfshirë në faqën përmbledhëse të dokumentit:
“Kapacitetet prodhuese të Kosovës mbesin të pa shfrytëzuara dhe ka pak konkurueshmëri në sektorin industrial në tregjet rajonale dhe Evropiane, që rezulton në pak eksport nga Kosova.”
“Prej 2007, trendet investimeve të huaja kanë qenë të ndryshueshme por me tendencë negative…përbërja sektoriale e investimeve ka lëvizur drejt patundshmërisë dhe ndërtimtarisë mes 2009 dhe 2013.”
Problemi i Kosovës në gjashtë shifra
NERP-i i Kosovës 2015 përmban shumë shifra por këtu po i prezantojmë gjashtë më të rëndësishmet që do të ju tregojnë (gati) gjithçka që duhet të dini për ekonominë e Kosovës.
305 million Euro – vlera totale e eksporteve nga Kosova në vitin 2013
Kjo shifër është jashtzakonisht e ulët. Për krahasim: Estonia exportoi në vlerë prej 12.3 miliardë Euro në vitin 2013. Estonia është më e vogël se Kosova sa i përket numrit të banorëve. Gjithashtu shqetësues është fakti që dy të tretat e eksporteve ishin “metale dhe minerale bazë”. Kjo do të thotë që vetëm rreth 100 milion Euro eksporte janë produkte të procesuara (ushqim, perime, plastikë) që krijojnë vlerë të shtuar. Pra Kosova nxjerrë minerale prej tokës dhe i shet – por prodhon krejt pak gjëra.
2.3 miliardë Euro – vlera totale e produkteve të importuara në Kosovë në vitin 2013
Kjo shumë eshtë shumë e lartë krahasuar me eksportet. Shtrohet pyetja, si financohet diferenca? Nga vijnë këto 2.3 miliardë Euro për të importuar produkte? Supozimi është që këto para vijnë nga jashtë.
Vlera e importeve lidhet ngusht me një shifër tjetër:
1.3 miliardë Euro – janë të hyrat totale të qeverisë së Kosovës në vitin 2014 dhe 871 milion nga kjo shumë vijnë nga doganat.
Kjo do të thotë që shteti – dhe 70 për qind e buxhetit – varet nga importet e taksuara në doganë (tatimet, akcizat, TVSH-ja).
Në mënyrë që të mirëmbahet vlera e tanishme e shpenzimeve publike, është e domosdoshme që importet të qëndrojnë së paku në nivelin e tanishëm. Nëse transferet nga jashtë do të zvogëloheshin, buxheti i Kosovës do të zvogëlohej gjithashtu. Kjo do të thotë që krejt struktura e financave publike mbetet e brishtë, edhe nëse buxheti balancohet çdo fund viti dhe deficit mbetet i ulët.
Kosova prodhon pak gjëra që mund të eksportohen – apo të shiten në vend – fakt që përkthehet në numra shumë të vegjël të të punësuarve:
220,000 njerëz janë regjistruar si të punësuar në vitin 2013.
Janë dy mënyra për të matur sa njerëz punojnë. E para duke parë se sa njerëz janë regjistruar si të punësuar – pra ata që paguajnë tatim apo janë të njohur për autoritetet publike. E dyta përmes Anketës së Fuqisë Punëtore (AFP) që definon punësimin si:
“Njerëzit e moshës 15-64 vjeç që gjatë javës kanë pasur ndonjë punë me pagesë, apo profit, apo të ardhura familjare monetare, apo kanë qenë përkohësisht jo në punë.” (AFP 2013, f. 7)
Kjo përfshin edhe këdo në familje që punon tokën, mjelë lopën apo mbikëqyrë kopshtin me perime, nëse këto produkte sjellin përfitime familjare, pa marrë parasysh nëse ato shiten për para të gatshme. Duke i përfshirë edhe këta “punëtor”, në vitin 2013 në Kosovë ka patur 338,000 të punësuar.
Këta dy numra na e mundësojnë vlerësimin e sektorit privat në Kosovë. Janë rreth 77,000 vende pune në sektorin publik, që do të thotë se 143,000 vende pune janë regjistruar në sektorin provat. Dhe sipas Anketës së Fuqisë punëtore, janë edhe 118,000 njerëz të “punësuar” pa qenë të regjistruar.
Këto shifra janë shumë të ulëta. Në kosovë jetojnë rreth 1.8 milion banorë, në 297,000 familje apo ekonomi familjare. Që do të thotë se mesatarisht në Kosovë është një i punësuar për familje, i/e cili/a duhet të përkrahë pesë persona tjerë (Kosova ka numrin më të madh të anëtarëve të familjës për shtëpi në Evropë: 6 anëtar).
E gjithë kjo shtron një pyetje kyçe zhvillimore: bizneset kosovare a do të mund të prodhojnë produkte konkuruese me të cilat do të marrin pjesë në tregjet e reja? A do të mund të konkurojnë me bizneset e suksesshme në BE, Ballkan apo Turqi. Që të jenë produktet kosovare të konkurueshme duhet të ketë investime, kryesisht në makineri të reja. Këto investime mund të jenë vendore apo të huaja. Dhe ja ku erdhëm te shifra e pestë:
241 milion Euro – investimet e huaja në Kosovë në vitin 2014
Kjo është shumë pak, dhe siç thuhet në NERP, investimet e huaja janë zvogëluar viteve të fundit.
Shifta e gjashtë na tregon se çfarë kushtesh kanë bizenset për t’u zhvilluar në Kosovë:
10 për qind – norma e interest për kredi në nëntpr 2014 (një vit më pare, 2013, ka qenë 12 për qind)
Kjo është shumë e lartë. Në Estoni (të dhënat nga Banka Qëndrore Evropiane) kreditë ndaj korporatave jo-financiare kanë qenë rreth 3 përqind në vitin 2014.
Çfarë na tregojnë këto gjashtë shifra për ekonominë e Kosovës?
Eksporti i mallrave është shumë i ulët; duke marrë parasysh trendin aktual të rënies së investimeve të huaja dhe normat e larta të interest për kredi për biznese në Kosovë, nuk ka shumë gjasë që kjo të ndryshojë në një të ardhme të afërt.
NERP projekton skenarin më të mirë të mundshëm në të cilin eksporti i mallrave do të rritej nga 305 milionë euro në 441 milionë euro në vitin 2017.
Ekonomia e Kosovës ka pasur shumë pak ndryshime strukturore që nga dekada e kaluar. Rritja e BPV që ka ndodhur është rezultat i shpenzimeve (konsumit) të ekonomive familjare të mundësuara kryesisht nga transferet nga jashtë vendit dhe rritjes së pagave të sektorit publik (kryesisht të financuar nga taksat doganore në mallra të importuara, të cilat poashtu kryesisht blihen me para të transferuara nga jashtë vendit).
Niveli i punësimit do të mbetet shumë i ulët në një të ardhme të afërt. Nëse krijohen vende të reja të punës në sektorin privat gjatë viteve në vijim, mund të pritet që disa bujq të largohen nga prodhimi jo-monetar e të kyqen në punësim të rregullt. Për të pasur rritje të dukshme të nivelit të punësimit dhe për të krijuar vende të reja të punës, Kosovës do t’i duhej një nivel i rritjes së investimeve dhe eksporteve që nuk mund të realizohet në vitet e ardhshme.
Kjo i bënë politikat publike në shumë fusha mjaft të ndërlikuara. Ta marrim çështjen e mungesës së aftësive profesionale. Për qfarë vende pune ka nevojë të përgatitet kjo gjeneratë e të rinjëve të Kosovës? Çfarë aftësi profesionale duhet të kenë? Nëse nuk ka industri ku ata do të mund të punësohen është vështirë të jepet përgjigja në këtë pyetje.
Gjithë kjo shfaqë edhe mangësinë kryesore të analizës së NERP: mungesën e analizës së migrimit aktual dhe në të ardhmen.
Përderisa fjala “remitancë” është përdorur disa here, “migrimi” nuk është përmendur askund në këtë tekst. Nuk ka diskutim të politikave – iniciativa të politikave të arsimit, politikave sociale, politikave të mardhënieve me jashtë – që do ta bënin të mundur migrimin e rregullt nga Kosova për në BE. Njëkohësisht, gjithçka që ka përshkurar NERP – deficitin e lartë tregtar, sektorin publik me 70 për qind financim nga taksat doganore, rritjen e BPV në vitet e fundit – është rezultat i drejtpërdrejtë i migrimit të para shumë viteve. Migrimi ka krijuar një burim të remitancave që mbajnë familjet kosovare – dhe sektorin publik – të gjallë sot. Këtë burim ka provuar ta ndërpresë BE që nga viti 1999, duke e bërë migrimin për punë gjithnjë më të vështirë.
“Promovimi i diasporës së Kosovës dhe realizimi i objektivave që dalin nga Strategjia për Diasporën dhe Mërgatën 2013-2018, e të cilat kanë të bëjnë me ruajtjen e identitetit kombëtar dhe kulturor të pjesëtarëve të diasporës, krijimin e kushteve për pjesëmarrjen e diasporës në jetën politike dhe sociale dhe përfaqësimin e tyre në institucionet vendimmarrëse të vendit, integrimin e tyre në vendet ku jetojnë, si dhe përfshirjen e diasporës në zhvillimin socioekonomik të vendit.”
Mirëpo, nuk është përmendur asnjë masë konkrete për ta sqaruar se çka nënkupton fjalia e fundit.
Mund të pritet rritja e presionit për kosovarët në vitet e ardhshme për të kërkuar punë dhe të ardhura gjetiu (në mënyrë të rregullt apo jo të rregullt). Përmasat e këtij presioni u janë bërë të qarta kohëve të fundit politikëbërësve në BE dhe Kosovë.
ESI propozon që BE-ja, në vend se ta refuzojë këtë lëvizje, duhet të provojë ta drejtojë atë në mënyrë që të pëfitojnë të dy anët. Migrimi jo i rregullt dhe ilegal duhet të ndalet, mirëpo duhet krijuar mundësi për migrim të rregullt pune. Kjo do të kërkonte angazhim të madh nga ana e autoriteteve kosovare në disa fusha të politikave, duke filluar me politikat e arsimit.
Paragrafi i parë i NERP i referohet “modelit mjaft specifik të zhvillimit të vendit”. Çka e bën këtë model specifik është fakti që nuk ka të bëjë aspak me zhvillimin e tanishëm në Kosovë por jashtë Kosove. Kosova ka përjetuar rritje:
“bazuar në dërgesa (remitanca) stabile dhe fluks të investimeve të huaja nga diaspora që rrisin mjaft kërkesën e brendshme nëpërmjet konsumit familjar dhe investimeve të kanalizuara kryesisht në sektorin e patregtueshëm, të tilla si pasuri të patundshme dhe shërbime.”
Kjo rritje është e bazuar në ata që punojnë dhe marrin paga në Gjermani, Zvicër apo Austri, të cilët kanë lidhje me familjarët e tyre në Kosovë.
NERP iu referohet rreziqeve:
“Modeli ekzistues i rritjes ekonomike të vendit në bazë të transfereve të mëdha financiare ndërlidhet me rreziqe të mëdha. Në kuptim afatshkurtër, faktor kryesor i rrezikut do të ishte rënia e papritur e këtyre transfereve – e shkaktuar nga zhvillimet e pafavorshme ekonomike në vendet me diasporë më të madhe të Kosovës – dhe pasojat negative në raport me rritjen, financat publike dhe stabilitetin e jashtëm dhe të sektorit financiar.”
Por pastaj ndalet, dhe nuk vazhdon tutje të diskutojë rolin e politikave të BE të cilat mundohen të ndalin migrimin e mëtejm. Përderisa, migrimi, i vetëm, nuk përbën politikë zhvillimi, pa migrim Kosova nuk ka të ardhme ekonomike afatmesme.
“Modeli i rritjes” së Kosovës
Punëtorët jashtë vendit, me familje në Kosovë
të holla që e mundësojnë konsumin lokal, i cili paguan për importet që mbështesin të ardhurat publike
Politikat e shteteve anëtare të BE
NDALIMI i kosovarëve për të lëvizur jashtë për punë jo të rregullt
MBYLLJA e shumicës së mundësive për të punuar jashtë vendit në mënyrë të rregullt
Rreziku më i madh për “modelin e rritjes” në Kosovë
Suksesi i politikave aktuale e shteteve anëtare të BE
Për të zhvilluar një politikë kredibile të migrimit, së pari duhet të pranohet që migrimi ka rëndësi kyçe në zhvillim. Edhe NERP-i duhet ta thotë këtë.
“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 firstname.lastname@example.org.
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 email@example.com.
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.
The ESI future of enlargement project is supported by ERSTE Stiftung in Vienna
Every year the European Commission publishes its Enlargement Strategy. The 2014 Enlargement Strategy, presented in October, starts out on a very optimistic note with the following sentence:
This assertion raises questions, though. How does the Commission measure the credibility of enlargement policy? For whom is enlargement policy more credible today than five years ago?
Here is a reality check. Eurobarometer surveys in 2008 and 2013 show growing opposition to enlargement in every single EU member state: old and new, rich and poor, those hit hard by the global economic crisis in 2008 and those relatively unscathed.
Enlargement has never been less popular in the EU than now. The 2013 Eurobarometer survey shows that an absolute majority of EU citizens oppose further enlargement (52 per cent). Opposition is stronger among euro area respondents (60 per cent). This table shows the significant lack of support for enlargement:
What is even more striking is the overarching TREND in the past five years: a dramatic drop in support across the EU. .
The fall in support for enlargement is sharpest in traditionally pro-enlargement countries such as Italy (where opposition to enlargement increased by 22 percentage points) or Spain (21). Post-2004 EU members, who initially were less sceptical, are rapidly catching up with pre-2004 members. The changes in Cyprus, the Czech Republic and Slovakia are dramatic.
Here opposition to enlargement has increased most since 2008:
What about the second claim in the opening sentence: that the European Commission has enhanced the TRANSFORMATIVE power of enlargement policy?
Here is a second reality check. Every year the European Commission assesses progress and the state of alignment with EU rules and norms (the acquis) in its annual Progress Reports. It examines for all accession countries whether the alignment in each policy area is “advanced”, “moderate” or at an “early stage.”
Here is what the Commission found in 2013:
And here is what the European Commission found for 2014:
Comparing these two tables, based on the European Commissions’ own assessment of progress, on the TRANSFORMATIVE impact of the enlargement process, we see the following:
First: there is very little change anywhere.
Second: in the case of Macedonia the Commission finds regression (from 9 to 8 “advanced” chapters).
Third: in the case of Serbia – which also opened accession talks in January – the Commission finds no change at all!
Either the EU process is not actually transformative or the current way in which the European Commission measures transformation in its progress reports is inadequate. Or both. Regardless, the most important documents written by the European Commission to show transformative impact of the enlargement process do not support the sunny view of the Strategy paper.
There is a second striking sentence in the 2014 Enlargement Strategy:
This is a standard claim, made by EU member states and by the European Commission. On 7 June 2014 the German chancellor, Angela Merkel, made a video podcast on Western Balkan enlargement in which she asserted: “There are very clear criteria for the steps needed to move closer to the EU. In the end it is up to each country whether they pass through this process rapidly or not.” The message: “the process is fair. It depends on merit. It depends on you.”
Is this claim convincing?
Look again at the 2014 assessment by the Commission. Macedonia, which became an EU candidate in 2005, is ahead of all other Balkan countries when it comes to its alignment with the acquis according to the European Commission. And yet it is behind Montenegro, Serbia and Albania when it comes to accession. Clearly this is NOT about merit.
Is Macedonia an exceptional case? Hardly. As bilateral vetoes have proliferated, the political nature of every single step in this process has become ever more obvious.
In fact, the problem of merit and fairness goes very deep. Today the accession process is like a stairways with more than 70 steps: to obtain candidate statue, to open accession talks, to open (34 or 35) chapters, to close chapters; then ratification and finally accession. (Note: one could count many more small steps, including the adoption of screening reports, etc …)
For each step up thes estairways there are 28 gatekeepers, EU member states, which have to agree to EACH step taken. And these 28 decide on the basis of political criteria, not merit. Whether Turkey opens Chapter 23, or when and whether Albania, Serbia or Montenegro are allowed to open a chapter, or Macedonia starts accession talks, are all political decisions.
This image captures accession today: a stairways that may well appear to be a stairway to nowhere, given the many veto points and the huge potential for obstruction.
There is one more striking fact about this stairways that renders the current debate on accession puzzling.
Half of these stairs are linked to the “opening of chapters”. In fact, much of the political debate on enlargement today is focused on chapters: how many get opened, and when. But few people – including experts or journalists – ever ask themselves: what is the POINT of “opening a chapter”? What does it mean? What does it do?
Take the case of Turkey, the most advanced country in its talks, having started in 2005, as an illustration. In 2014 Turkey had 14 open and 18 closed chapters (we leave two chapters, where the Commission provides no assessment of alignment, out of this table here – chapters 23 and 34).
As the following table – based on the Commission’s own assessments in its progress report – shows, there is no causal or other link between the alignment (state of progress) in a sector and whether a chapter is open or closed. This means: whether a country has many or few open chapters is no indicator of where it is in terms of its preparedness for EU accession.
What is no less surprising: opening chapters is not only not a yardstick of progress; it is also not an incentive to make more progress in the future. This is what the European Commission found in Turkey in 2013: there was MORE progress in closed than in open chapters in Turkey during the year.
This raises a basic question: why is it so important to open chapters? Having many open chapters does not indicate progress towards meeeting EU standards. Having many open chapters also does not make future progress more likely.
“In the light of the above it is stated that opening the chapters Energy (15), Judiciary and Fundamental Rights (23), Justice, Freedoms and Security (24) and Foreign, Security and Defense Policies (31) would facilitate Turkey’s drawing a robust road map under the EU umbrella at a time when the country faces three successive elections.”
This is the conventional wisdom, repeated in conference after conference, article after article. However, it is not explained HOW opening a chapter is crucial for either the EU or for Turkey; why a Turkish citizen, or a sceptical EU member state parliamentarian, should consider this significant.
In summer 2013 there was a heated debate in Turkey and in the EU whether to open a new chapter after many year in which none were opened: Chapter 22 (regional policy). There were many statements by politicians about how important this would be. Egemen Bagis, Turkey’s chief negotiator, explained in April 2013:
“Since no new chapter has been opened, I have kindly asked our prime minister to slow down everything until a new chapter is opened. I thank him for having done that. Now the process for the opening of the regional policies chapter has begun.”
Foreign minister Ahmet Davutoglu stated:
“No postponement or review of the decision to open it is possible. As we said before during the reform follow-up group meeting, we want not only the chapter 22 to open but also the chapters 23 and 24.”
The German government, on the other hand, insisted on delaying the opening until after summer 2013. In the end chapter 22 was formally opened in the autumn. Leaders – and international media – spoke about this as if something significant had happened (Die Welt: “Accession talks gain new momentum”)
In fact, following a meeting – the so-called Intergovernmental Conference – when it was declared that Chapter 22 was now “open”, nothing else happened. There was no additional meeting. There was no additional funding. There was no additional impetus for reform. The “opening” was political theater, for one day. It had no link to merit, criteria, or progress. Ultimately it made no difference.
We can now easily understand how all these dynamics create a deeply frustrating and dysfunctional process.
In the face of growing public opposition, many EU leaders have given up defending enlargement policy. Seen from Brussels, Berlin, Paris or The Hague, the current group of candidates are problematic. They are poorer, have weaker institutions and are more politically polarised than any previous group of applicants. This has created a vicious cycle. As enlargement loses popularity in EU member states, EU leaders try to reassure their voters that the process is stricter than ever. Yet as the hurdles to be jumped appear more and more arbitrary, candidate countries find it harder to take difficult decisions in pursuit of a goal that is increasingly distant and uncertain. The stairways approach makes vetoes extremely easy. And the public debate is focused on whether chapters are open or closed, not on whether reforms are taking place.
This is not enlargement “fatigue”, suggesting a temporary state of exhaustion. It is a chronic ailment, which is getting worse.
And at the heart of this frustration are the annual Progress Reports. As ESI found, discussing these in many European capitals during the past year, few people, even EU foreign ministry officials, read these carefully. The reports are not doing a convincing job measuring progress. They do not allow for comparisons between countries in any operationally meaningful detail. They do not educate the public about what needs to happen. Above all they do not make real transformation – if it happens – visible also to sceptics. It is as if everyone – reformers in candidate countries, publics, policy makers in the EU – is proceeding through thick fog.
Such a proces increases frustrations. We have called this the Godot effect. It is today most pronounced in Macedonia and Turkey. However, unless the process change we may anticipate that something similar could soon happen in Montenegro, Serbia and Albania, as cynicism increases. In Bosnia and Kosovo, there is today frustration, cynicism and apathy before any EU accession process has even begun. Bosnia has not yet applied for accession. Kosovo is not even able to apply.
So what is to be done? In order to answer this question let us imagine a very different approach to defining and assessing progress; one that is strict, fair and transparent. A process as follows:
To imagine such a process is not to daydream. For this is how the Commission has acted for years in the context of visa liberalisation.
In this crucial area ALL countries in the Balkans were given precise visa roadmaps with dozens of benchmarks. These roadmaps set out clearly what the Commission expected. They listed all individual criteria. There were no short cuts. And these roadmps, based on the acquis, were essentially the same for all countries, and thus progress easily compared.
The Commission then organised a serious monitoring and assessment effort. This involved experts from the Commission and from member states. Based on their findings detailed progress assessments were issued.
The whole process was developed by the Directorate General for Home Affairs together with the Directorate General for Enlargement. And it worked. It inspired many reforms. It made it possible to see where real reforms happened … and when they did not. Above all it convinced even sceptical EU interior ministers that when the Commission did find progress they could trust it.
The result of such a strict, fair, and meritocratic process in the case of the Western Balkans was to inspire civil servants. It was also clear to them what needed to be done. All countries were assessed based on the same criteria. It was possible to make transformations visible; even in special grade reports, that ESI issued at the time, based on the Commission experts’ assessments:
We can compare the thoroughness of this process with the current assessment of progress in key chapters in the Progress Reports. Let us take just one subject, Chapter 18 (Statistics).
Look at the current assessment of progress in the field of statistics in Turkey, which has been in this process the longest. In 2014 the European Commission published just four short paragraphs, about half a page, on this chapter in the Turkey progress report. A reader does not understand from this how far Turkey has come, what remains to be done to reach EU standards, or in what specific areas most efforts are still needed. Nor can one see how Turkey compares to other candidates.
This is surprising for many reasons:
1. The recent experience with Greece. Following the discovery of just how unreliable key statistics provided by the National Statistical Service of Greece (NSSG) had been before 2010, a new statistical agency, ELSTAT, was created. This was a priority for reform for the EU!
One might expect the EU to be just as keen to see all Balkan countries reach EU standards for all their key statistics, as soon as possible, and well before actually joining the EU, in order to be able to develop a credible track record.
2. The importance given to “economic governance” in the accession process. Without reliable economic statistics, from GDP per capita to employment, from the FDI stock to exports, discussions of economic governance in progress reports are of little use; and any evidence-based policy making on the part of governments is very hard.
3. One objective of the annual progress reports is to assess whether a country is a “functioning market economy” or FU-MAR-E. How can this be done without comparable and solid numbers and statistics?
The sooner all accession countries reach EU standards in the field of statistics the better. Now imagine a scenario where the European Commission draws up a roadmap for Chapter 18, gives it to every country, and thus spells out what all the key benchmarks for a future EU member are … and then assesses the state of affairs against these benchmarks every year with the help of experts, in order to produce a document on statistics that is similar to the recent October report the Commission produced for the Council and the European Parliament on visa liberalisation.
The current EU accession process has not halted the erosion of trust in the policy since 2008. It has not led to measurable transformative impact in key policy areas. The visa roadmap process, on the other hand, has inspired and encouraged change. It has also – crucially – made this change visible and credible to sceptical outsiders.
Given these experiences ESI proposes to the European Commission to put the idea of chapter roadmaps to the test as soon as possible.
We propose that DG enlargement develops four pilot roadmaps, and then assess progress in these four fields similar to the way the Commission has done with visa roadmaps; for all accession countries, already in the 2015 Progress Reports: Statistics (fundamental for economic governance), Procurement (central to progress in the rule of law and the fight against corruption), food safety (key to attract FDI in a vital sector) and Financial Control.
Giving such chapter roadmaps to all seven countries, and assessing them by reference to these benchmarks in 2015, would mark a small but very important improvement in the current process of writing progress reports.
One additional effect would be similar to the regional competition we have seen in the field of visa liberalisation. Or to the debates on public policy triggered by the Paris-based OECD with its regular publication of results of its PISA tests in the field of education.
ESI has recently presented these ideas in many capitals. Here are five of the most frequently asked questions concerning this CHAPTER ROADMAP PROPOSAL
The first question often posed concerns incentives. In the case of visa roadmaps, we hear, there was a clear “reward” at the end of the road: visa liberalisation. This was popular with the broader public. Would elites and civil servants in accession countries be equally motivated to carry out reforms in fields such as Statistics or Procurement, without a similar tangible reward?
We believe that this question puts the issue of incentives upside down.
When elected governments say that they want their countries to join the EU as a matter of national interest – and embark on a many-years-long process that requires work, focus, human resources, and that remains uncertain until the very end – they state that they have an intrinsic motivation to carry out reforms. The notion that the EU should “bribe” governments to incentivise them to carry out reforms on this path is wrong. Governments that need to be bribed in such a blunt manner should never apply, and simply risk being exposed as uninterested in the EU accession process. Then it depends on publics and voters who they will react.
The EU acccession process is more similar to a young football player being offered a place at La Masia, the famous football school of FC Barcelona; or to a budding entrepreneur admitted to Harvard Business School.
People do not get paid to submit themselves to rigorous training at these institutions of excellence. Instead they have to work hard. If they do not have intrinsic motivation this will become apparent very quickly, but in a fair manner.
However, no one would think that a young footballer might just as well practice all by himself in the street, rather than benefit from the training system of La Masia; or that a great business school has nothing to offer to those who come prepared to work hard. What such centers offer is excellent coaching by experts, precise feedback, a system of instruction that will make those who take part better at what they say they want to do in the future.
Of course there are also more specific rewards: prestige and certificates to validate progress. In the case of chapter roadmaps more FDI – if investors believe that institutions and rules are becoming more predictable. One can even imagine more donor aid for those who perform best. But the real reward is for leaders – and civil servants, who do most of the extra work and are not paid more for it – to feel that what they do is taking their countries forward; that is makes sense for their country and for them professionally. For this incentives must be intrinsic.
Can such chapter roadmaps be done for every chapter? No. We believe that they cannot be done for some chapters where there is no clear acquis (Chapter 23 or Chapter 30).
But this does not mean it cannot or should not be done for most chapters.
Does such a roadmap-approach encourage superficial reforms? Not if the roadmap – like visa roadmaps – is done well, and measures not just laws but institutions and performance. Then it becomes a very good tool also to assess progress over time and track records.
Is this a dramatic change in enlargement policy?
No. Member state do not lose their veto. They still have to agree – unanimously – to give candidate status, to open accession talks, to open chapters, to close chapters. However in the meantime the Commission helps these students get better … and provides member states with more information and feedback to assess how accession countries do.
Such an approach allows the European Commission to do better what it is already doing and already has a mandate for: assess annual progress according to the Copenhagen criteria in all countries in a strict and fair manner, provide feedback, and encourage reform.
Such a change puts the substance of actual reform back at the heart of the accession process. This is win-win situation for everyone.
Not everything will be in such roadmaps. Some reforms only make sense just before accession. The aquis changes, so it also makes sense to adapt roadmaps every two years. It is always possible for member states to insist on additional reforms as preconditions for them allowing a chapter to be closed (or even opened, though this can both happen at the same time later; Croatia actually opened and closed a number of chapters all in the final year of its talks).
These chapter roadmaps would likely capture 95 percent of reforms needed in key areas. This would be a flexible tool (fishery benchmarks might be of different importance in landlocked Macedonia than in Turkey), but in the end the idea is that the acquis is the same for all future members, as they are all heading for the same horizon.
The past five years have seen a steady erosion of trust in enlargement across the EU and in many accession countries.
Turkey has been negotiating since 2005 and has not yet opened even half its chapters.
Macedonia is a candidate since 2005 and has not yet been given a date even to open talks.
Albania became a candidate this year, but has been warned already that it could be years away from opening accession talks.
Bosnia and Herzegovina concluded its negotiations on the Stabilisation and Association Agreement in 2008 without seeing the agreement enter into force.
To an increasing number of people in accession countries the current process appears to be a stairway to nowhere. And yet, reforms in all these countries are in the interests of their citizens. They are also in the interests of the EU. As the new Commission reassesses how it can best promote reforms, we believe it should seriously look at what has worked in recent years.
We believe that improving the work that goes into the progress reports does not constitute a change in enlargement policy, and that therefore the European Commission can act on its own to improve what it is already doing. However, such a change does alter the way the Commission works. It is a real challenge, and it makes sense to implement it gradually, testing it along the way. It remains to be seen whether the new European Commission is able to carry out such reforms.
For the sake of all Europeans, we can only hope it is.