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Way out of abyss: Serbian public sector is the most inefficient in Central and Southeast Europe

At Way Out of Abyss panel, first one at „Freedom and Reform“ conference held at hotel Metropol, catastrophical condition of Serbian public f...
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Libek Organizes a Panel Discussion on Government Spending in Serbia

On May 27th, Libertarian Club – Libek organized a panel discussion called „How does government spend our money“ at Hilton Belgrade.

At Way Out of Abyss panel, first one at „Freedom and Reform“ conference held at hotel Metropol, catastrophical condition of Serbian public finances was noted and an appeal was made for an urgent reform. Research done by Libek was presented, concerning public sector efficiency. Panel was moderated by Biljana Stepanović, from Nova Ekonomija magazine.

Mihailo Gajić, program director of Research Department at Libek, presented the research on public sector efficiency in (post)transitional countries. Countries that have become members of EU since 2004 were processed, candidates and potential candidates from the Balkans, as well as Turkey. „Serbia with 0.74 percentage points, in regard to 1 which is average – finishes last concerning public sector efficiency among specified countries“, stated Gajić. Research which is available at our website also shows that by increasing public sector efficiency major fiscal savings are possible without reduction in quality of public services currently provided to citizens.

Vladimir Vučković from Fiscal Council stated that in 2014 budget deficit will be around 8% of GDP, public debt will go over 70% GDP, and that no fiscal consolidation occured. „Role of the state is to reduce bureaucracy and increase capital investments. Public companies are a major problem on which all savings from reductions in payroll will be spent“, said Vučković and added that everything from solidarity taxes was spent for penalties that state has to pay for outstanding liabilities.

Joe Lowther, director of USAID for Business Enabling Project said that economic growth is indispensable for increases in income side of the budget and employment. „Growth comes from the private sector and from increase in productivity. Good business environment is very important for increase in productivity in private sector. In Serbia regulation is at a high level on all indexes – Serbia is at 140 of 144 by WEF index of state regulation, and by USAID BEP model 3,7% of GDP of Serbia is wasted due to regulations and bureaucracy“, stated Lowther.

Dušan Korunoski, special adviser to the Minister of Economy stressed that labour levies directly effect economy’s competitiveness, and with it employment. Korunoski announced that in mid-term the Ministry will publish an action plan for cutting down labour taxes.

Representative of NALED, Jelena Bojović, presented results of researches that they have conducted. „Attitude of businessmen is that every second employer in their sector does not register their employees. This shows a complete lack of trust in the state, judiciary and other institutions. Eighty percent of businessmen think that the state is not managing its resources in a proper way. Thirty percent had to lay off workers in the previous year. There is a tendency of constant fall of productivity and growth of grey economy.

Economist Aleksandar Stevanović assessed that the state is incompetent in its own basic functions, such as judiciary and policing, let alone investing or solving other problems, as well as that it is very troubling when the state endures as an instrument of satisfying its clients and friends of the authorities.

Bojan Đurić from the Reform Council said that people in Serbia constantly vote for big government on elections. „Competent people have no motivation to work in the public sector which is immensely bizarre at every step. Chaos in the public sector is spilling over to the political sector“, stated Đurić and added that insisting on pay reductions for politicians and experts in the public sector is demagogy – „You cannot expect that competent, motivated people can come to those positions if they are underpaid“.