INTERVIEW: JELKA MILIĆEVIĆ, MINISTER OF FINANCE AND FBIH DEPUTY PRIME MINISTER
Interviewed by: Denis RAKANOVIĆ
SARAJEVO, September 20 (ONASA) – The Minister of Finance and FBiH deputy prime minister Jelka Milicevic in an interview for the ONASA, among other things, speaks about the Federal budget deficit, causes of devastating economic situation, the so-called “hidden debts” coming due, obligations to the Pension Fund and unpaid invoices in the name of judicial decisions, meeting the conditions required by the IMF, the World Bank ….
ONASA: How do you assess the financial situation in FBiH and in what way a huge deficit of the federal budget can be compensated?
MILIĆEVIĆ: In the Federal Ministry of Finance we have responsibly approached the issue of the deficit of the Federal budget and we tried to objectively assess the situation. In the budget of FBIH for 2015 amounting to approximately 2.3 billion BAM there is no amount of 200 million BAM for the debt, ie obligations of 2014, that were succeeded by this Government and the Ministry. I think we have talked and reported about it several times, but this debt needs to be paid. We found over 70 million of debt on behalf of the final court verdicts, which for this year is over 50 million BAM, which must also be addressed. As a source of financing in the Federal budget for this year the tranche of the International Monetary Fund (IMF) was planned and for its withdrawal the previous government had not created conditions. The previous government, in the package of election promises, such as increasing pensions, disability allowances, binding service, restructuring of state enterprises and enterprises in which the government holds shares, created obligations for which they knew in advance that they do not have opportunities to realize. The first thing we did was introducing a moratorium on recruitment, we have reduced material costs to a minimum, we reduced the minimum amount for the purchase of vehicles, we opted for responsible behavior and responsible spending of public funds. So, we opted for a restrictive financial policy, but in order to successfully implement it we have to have coordination with the cantons, and through them with the municipalities because it is necessary to have mobility with lower levels of government in order to perceive the actual situation on the ground and make progress. Also, we launched activities to increase tax compliance and responsibilities of the inspection bodies, so that for half a year, compared to the previous year, we had an increase of somewhere around 150 million BAM of revenue from indirect taxes and revenues from direct taxes is around 57 million BAM . It is estimated that we will have a reduction in expenditures for salaries of budget users somewhere around 15 million BAM. We already have saving of about 4 million BAM in material costs. The problems that we encounter and that we will continue to encounter are reflected through the budget revision and we have already introduced a new category – the cooperation with commercial banks. We are happy that the banks are stable at the moment and that we can be partners, we take intensive negotiations and those are going to be a substitute for lack of tranche of the IMF, while we also have offers, ie discussions with international financial institutions that will in some way alleviate the lack of Arrangement with the IMF.
ONASA: Do you think that in the current socio-political relations it is difficult to be the Minister of Finance, especially if you are woman?
MILIĆEVIĆ: Maybe women somehow naturally learn and know to manage budgets, first within family and then some bigger, more complex budget. The Minister of Finance should be technical support to all other policies. What I am trying to say to my colleagues in the government is that the responsiblity for budget is responsibility of all ministries and all ministers, so we negotiate and talk about the budget or about finance in that respect. We can not make commitments and implement policies governing the rights on various grounds, if we do not have sources of funding. We can not expect for the increase of the revenue to be allocated only to social security benefits, ie to transfers that are not offering new jobs, do not create a business environment for new jobs. For war, and non-war disability benefits, favorable pensions, about 95 percent of the budget is set aside, which is not good for generations to come and we are not sending them a good message. For these reasons, in this very difficult time we advocate the project and program first employment and first self-employment. This means that we will actually offer a project where for a year government “buys” a position at the employer. We will not prefer the budget users or public companies, we will prefer the small and medium private enterprises, where we will make arrangements, ie offer to educate the trainees a year, and the employer will educate them for another year. In two years we expect this young man who has experience of the theory, and practice to acquire and run their own business or be an employee of that employer.
ONASA: What are, in your own conviction, main causes of the devastating economic situation both in the FBiH and the whole country and do you see who and how could prescribe medication and therapy to cure the patient?
MILIĆEVIĆ: When we are sick there are usually a lot of diagnosis and in fact there is never just one diagnosis, but it requires reexamination. I would say that for the last 20 years a partial policy has been carried out. I think we have a chance to develop, and to define economic development on different grounds. In all countries, there is a theory of economic entities and state monitors and encourages it very seriously. These are so-called elephants in the economy, representing some five or ten companies that are particularly important and which are continually monitored, because the so-called tigers which carry the development of any society revolve around them. We came into a situation that we do not have these elephants, nor the tigers have some incentives.
We conducted the privatization of enterprises that were unsuccessful and had negative consequences, and then these and such companies were returned to state ownership. We now have a major problem for all companies with any share of the state capital, because they are slow, with large debts, with great dissatisfaction with unbound years of service, with the implemented restructuring measures, which have not yielded results. We advocate Act of binding of service where we defined three lists: one list is of companies of strategic interest for the Federation, other are companies with problems that will have to go in the restructuring and finding a final solution and the third is the list of companies in which the government is a minority owner, where we will enter the sales process. And these will not be sold in the mission of filling the budget hole, but will be on a mission of survival of these companies, because our greatest achievement is for company to survive, to hire new people. To achieve the outlined, which by some our estimates would amount to about one billion BAM, which financially we can not keep, we requested the technical assistance of the World Bank. Without such solutions there is no stable right side or the revenue side of the budget, and the cost ie expenditure side of budget always exists and there is always shotage of money. That is why the Government all the reform processes that it advocates, bounds to create an environment, that is a preconditions for businesses.
We must know that in the Federation the depositors in banks currently have 6.7 billion BAM that are in the savings with very low interest rates. Our banks are preferred partners to the depositors rather than the state that has not created the conditions for the investment of money, either for being shareholders in companies or for starting their own business. When a local man or a potential investor does not have confidence in you, then the foreign investor will not have confidence either. In my opinion the business environment should be created so that local people, local depositors, potential investors are the recommendation and in some way a magnet for foreign investors.
ONASA: Do you think it is fair that you as the Minister of Finance can not choose co-workers, assistants that you can trust, and to what extent does the “inherited financial condition,” as well as the staff that is available affects your work and work of your ministry?
MILIĆEVIĆ: It is an entire segment of the labor market and within it there were two activities that we have defined. The first is the Labour Law, the other is the Law on Civil Servants. Category of civil servants and the possibility of choosing or not choosing I would consider separately. At a time when the Law on Civil Servants was passed, the category of managerial civil servant made sense, however, a problem may arise if there is no control mechanism, monitoring of work, and mechanism for re-election then we tend to be left without ideas, we are not motivated, and we often have the feeling that nobody can affect us. It is not a general assessment of all, it is more about individuals, which ultimately creates a bad image. At the Ministry I have good assistants, but I would like them to know that each new minister has his own way of working. We have worked a lot in this time and I can not have any objections to their work, but looking from different angle and looking at the other Ministers and the Ministries, such situations do exist. It is good that assistants and managerial civil servants will have limited mandate, it is good that this vertical mobility will be possible between the ministries, they do not have life tenure, because nothing in life lasts forever, everything is relative and only this moment counts. That is why I advocate for changes to the Law on Civil Servants and it will soon be considered by the Government and referred further to the parliamentary procedure, not in order to dismiss anyone, but simply because of the creation of the preconditions for the civil servant to actually be a civil servant by status, income, responsibilities and assessments. It all goes hand in hand, he must be the one who is the holder of the policies and activities of the Government and of each and every minister.
ONASA: Is the current Ministry that you lead the creator of financial policy or just an institution that in one way or another fulfills one’s desires and demands?
MILIĆEVIĆ: The Ministry of Finance may be, after the government institution, the most important function of the Government. Without consent and the opinion of Ministry of Finance nothing can be adopted in the Government. We must have our attitude, our opinion based on law. I must commend that from April 1, not one decision has been taken by the Government if the opinion of the Federal Ministry of Finance to the decision was either restrained or negative. All issues related to tax policy, the budget, the budget revision, the strategy of debt are exclusevely within the competence of the Ministry. We want to improve and strengthen it. We will make an examination in the Ministry related to human resources at our disposal and with regard to our vision, because we have a lot of financial institutions that need a coordination. It is all in the mission of managing, ie proposing of active policy on the financial consolidation of the budget. There we feel very important, very invited, and it is ultimately our responsibility.
ONASA: Did the state that you found contain a so-called hidden debts and how you plan to address this problem?
MILIĆEVIĆ: If all these hidden debts on various grounds totaled they would amount to around 300 million BAM. It is something we have yet to analyze and look close into, in order to get correct information on how much we owe. These are obligations that we have to realize, which we will probably achieve through negotiations and through more active policy, ie through the possibility of borrowing.
ONASA: Are there any obligations that you know that under no conditions can be met, such as, for example, the fact that there are about 35 million court judgment or obligations to the Pension Fund?
MILIĆEVIĆ: The judgments have to be paid. We plan to settle a debt in accordance with our capabilities, which this year amounts to about 17 million BAM. Also, there are obligations to the Pension Fund, promised increase and payments under the Law of more favorable retirement , which must also be settled. We had intensive negotiations and agreements these days with the Association of Pensioners and the Fund MIO. We even talked about changing the order of payment, because now we first pay pensions, then compensation for war disability benefits, then for civil and civil servants’ salaries or budget users. We said that we will also change this part a little, salaries can not always be in the fourth place, we have to feel the problems and the lack of these funds, and these will once be replaced by subsidies for agriculture, another time it will be the payment for displaced persons, transfers for culture and sport, etc. We will try to reach agreements on these issues, because we speak and reach agreements on everything, we express how much money we have and what are now our priorities. It is one continuity and we probably will not be able to pay all in the very start. In the Treasury, we have more than 11 million BAM entered on commitment for capital transfers in agriculture, suggesting that these obligations were created out of the procedure because the obligations for incentives for the production itself were not created. In consultation with the Ministry of Agriculture, we brought the conclusion to do the control of awarding incentives, and based on that, the inspection authorities have determined that there is dispute about five million BAM of incentives. It certainly will not be paid off. The rest of more than six million BAM will be the last in a series of payments this year. We give priority to incentives for production in agriculture.
ONASA: Is FBiH Ministry of Finance, in such confusing situation, able to fulfill all the conditions required by the IMF, the World Bank?
MILIĆEVIĆ: Representatives of the International Monetary Fund (IMF) were my first interlocutors when I entered the Federal Ministry of Finance. I perceive IMF as someone who will consider us a bit more objectively, point out to our failures, and be a support in a certain way, because in the conditions as they are we often are not able to realize the planned measures. We quickly agreed on what it is that we need to do at this point to move forward, to create some kind of a long-term basis for greater economic growth, to create higher gross domestic product, for a more stable environment, ie business environment for employers, social stability for users of benefits, for improving the health and pension funds, funds for employment .. I must also mention the reform agenda which is being discussed very frequently and which is said to have been imposed upon us. The truth is that we are co-creators of the Reform Agenda, ie that a lot of questions were jointly defined and we said what we must do if we are to make a difference, and this government wants to make changes. In a very short time, we brought a lot of the reform laws and reform decisions.
ONASA: Can FBiH, in today’s conditions, function without the help of the IMF and is BiH, in such circumstances, desirable destination for investment to anyone?
MILIĆEVIĆ: Arrangement with the IMF is recommendation to all international financial institutions that Bosnia and Herzegovina and the FBiH is a good environment where they can act. The fact is that amount that the IMF gives us, can be found in commercial banks, but what we can not find is the support of the World Bank, the European Bank for Reconstruction and Development and other international financial institutions because they are accompanied by investments and investment cycle because budgetary funds are not able to stimulate neither public investments nor infrastructure projects, and without it there is no further progress, nor any major procedures, including the people who will come with larger projects and implement them in our region.
ONASA: What is your opinion on the newly adopted Labour Law and do you think it will improve or further darken the financial picture of the FBiH, ie BiH?
MILIĆEVIĆ: The Labour Law was rumored for many years. We went through the Economic and Social Council with the Law to see what is good in it, and what needs to be adjusted. I am proud and happy that this law provides more rights to women, because I am a woman and a mother. The issue of mobbing also found its place there. What was most talked about and questioned was the collective contract, which has until now been indefinite. It is in the interest of both the employer and the union for this to be changed, and adjusted depending on the situation in the country. We can not have rights that reflect neither the economic nor the social situation in the country. We can not even talk about some of the minimum wage in certain sectors, in the energy industry, government service, while at the same time we have a minimum pension of 326 BAM or an average of 360 BAM. I must also say that this law was not imposed upon us. So far, the fine for failure to register workers was up to 1,500 BAM, no matter how many employees you have, and now we have insisted that the fine for each employee who was not reported be 5,000 BAM, so if it is ten employees, then it is 50,000 BAM. The Labor law states that employers for unpaid wages, unpaid taxes and contributions to employees by the end of the month for the previous month, receive misdemeanor charges in the amount from 15,000 to 50,000 BAM. So the Labor Law which we talked a lot about has brought nothing bad. Employers often tied up and used the institution of the contract of temporary jobs, used the institution of temporary employment with intermittent service. We have now prevented that too, because, for example, employers before used to hire workers for two years for an indefinite period, and would have made a difference of 15 days, and then re-sign the contract, which was about the same as giving a vacation to the employee. We said no, now you must make a break of six months, because if the employer needs the employee, it is too long for him to wait six months, he would hire him permanently or will look for someone else. The next step of the collective agreements. We have told the Union that we are not interested to have disgruntled state officials and employees. It is in our interest to have people who are responsible in their jobs, and that the good are rewarded for their work, they have all their rights guaranteed by law and collective agreements. These 70 million final court judgments that we mention are the result of complaints of civil servants. When I was asked whether I mind this, I said no, because you can not expect from someone who has a legal right not to use it. If you have the possibility to sue the state for regress, to comply with the cost of living, no matter what the situation in the Budget may be, you wish to exercise that right. Everyone in this country has to bear the burden, and we, through collective agreements advocate different accounts, bases, so-called harmonization. We currently have large average salaries in desirable firms such as Elektroprivreda. On the other hand we have utility enterprises, mines where the average salary is very small, then the category of people with minimum pensions and in the end we have a minimum wage with the calculation of taxes, which are widely used. (End)