Focus: Election year 2020 and reforms – Are we already feeling the impact?

Looming Challenges Require Bolder Political Responses

Although Serbia has for years been living in a state of permanent election campaigning, current developments are adding new steam to political dynamics, thus capturing the attention of the international and national public, and making the upcoming 2020 elections a hotter issue than previous votes. However, political responses are failing to address strategic societal and economic challenges that require the close attention of the incumbent government and political contenders

Focus: Election year 2020 and reforms

Election years in every country are traditionally seen as a time when governments refrain from launching bold reforms, opting instead to play it safe so as not to upset the electorate. We asked our interlocutors to comment on how Serbia’s 2020 election year will shape reform prospects and the business environment. Both politicians and economists offered their views on matters that impact on the process.


 

Aleksandar Vlahović
President of the Serbian Association of Economists

We Overestimate Successes & Underestimate Risks

Structural reforms require a long-term commitment, sacrifices and constant work, and don’t bring political points, so they are most commonly delayed substantially during an election year.

For someone who’s unfamiliar with the political situation in Serbia, it would be very difficult to distinguish between an “election” year and a “regular” year. That’s because of a continuous campaign s present on the political scene, and also due to the fact that some “fatefully crucial” elections take place every year. This certainly also has its impact on decisions related to the implementation of economic policy, but also on the implementation of projects from the so-called structural agenda.

Generally speaking, there is an overestimation of the significance and impact of measures taken to ensure short-term fiscal consolidation, especially when it comes to realising fiscal savings by reducing wages and pensions, while – on the other hand – there is an underestimation of the positive impact on economic activity in Serbia of good economic conditions in the countries of the Eurozone, which was particularly pronounced during 2016 and 2017.

In this regard, the apparent crisis in Italy and stagnation of the German economy (countries to which we send more than 22% of our exports) are not viewed through the prism of the impact they already had on our country in this year alone. This suggests that – as much as they may be justified – increasing wages faster than nominal GDP growth in the education and health sectors, as well as in other segments of the public administration, could cause a deepening of external deficits – in foreign trade and current account flows.

More careful analysis of the results achieved in the first seven months of this year shows that this tendency is already present. The current account deficit has increased by more than 2.4 percentage points, while the foreign trade deficit is up by approximately 20%

The increase in the level of foreign direct investment, which will reach approximately 8.4% of GDP this year, is worthy of all praise. However, the fact that domestic private investments are reducing year-on-year in terms of their share of total investments is ignored. Here we come to the structural reform agenda, which implies the more efficient restructuring and partial privatisation of public enterprises, as well as the improving general conditions for doing business.

Consequently, it is essential to make progress on more effectively protecting property and contracts, financial discipline and the equal treatment of market participants. It is necessary to strengthen institutions and improve their quality. In other words, it is necessary to create an economic environment that will encourage local entrepreneurs and individuals to save more, invest, adopt innovations, take risks – i.e., all the activities that generate growth and raise the level of employment. Structural reforms require a long-term commitment, sacrifices and constant work, and don’t bring political points, so they are most commonly delayed substantially during an election year.


 

Cvijetin Milivojević
Director of PR Agency Pragma

Elections and “Elections”

The condition of all conditions for a reasonable election campaign is for citizens to be given an opportunity to overview the actual situation in society and critically evaluate all of the political responses offered to them

Serbia has been in election campaign mode since last autumn, when the majority of the so-called ‘real opposition’ ceased participating in the national assembly, due to regime torment, and when – almost simultaneously – citizen protests began under the title “Stop Bloody Shirts”, after a group of bullies close to the authorities gave a beating to opposition politician Borko Stefanović.

The fact that the regime has since then been pushing the so-called ‘constructive opposition’ – i.e. those formally oppositional entities that actually work for the current regime – is merely an attempt to mask the fact that three-quarters of citizens (those who don’t vote and those who don’t vote for the current government) haven’t had their own representatives in state and political institutions for a year already.

A propaganda campaign, meaning a negative campaign, is being led from the top of the government and directed primarily against political players and public figures who advocate the view that any election is meaningless without the prior normalisation of election conditions that would ensure more or less equal treatment and a position for all participants in the elections set to follow in the spring.

The other direction of this campaign to disqualify and target every critical attitude regarding the regime is directed towards the so-called ‘real opposition’, meaning all those who have the courage to warn against the daily anti-constitutional activities of the incumbent President of the Republic, who has usurped all prerogatives of the executive, judicial and legislative authorities, even though the constitutional position of the President of Serbia, according to the Constitution, is only ceremonial, i.e. protocol.

The attempt to establish a dialogue between the authorities and the opposition regarding electoral conditions, under the mediation of George Soros’s Open Society Foundation, had no prospect of success, because the government persistently avoids discussing core issues, which primarily related to the need to liberate or “bring to a better known right”, the public media TV service and the most-watched television channels with national frequencies, as a condition of all conditions for the citizens of Serbia to understand that the “Land of Dembelia” (or Tommaso Campanella’s utopian “City of the Sun”) portrayed on these television stations doesn’t actually exist, and if it does exist then it certainly isn’t today’s Serbia!

If the announced mediation of MEP rapporteur David McAllister fails, a paradoxical situation could arise, with the regular spring election seeing President Vučić’s party run against itself and its “electric rabbits”, and then, shortly afterwards, due to the course of events, being pressured to call new and more democratic elections.


 

Jurij Bajec PhD.
We Lack Good Responses

We Lack Good Responses

It is concerning that neither the opposition nor the government has a clear commitment and plan for accelerating reforms in the area of the rule of law and the efficient functioning of market institutions, which are prerequisites for more serious economic progress and raising the standard of living for citizens

There isn’t (as yet) a real pre-election atmosphere. There is more of a feeling of a pre-election atmosphere in which the opposition insists on equal media and other conditions in the election process and is threatening to boycott the election. On the other side, the government is granting certain concessions unhurriedly and step-by-step. It remains uncertain when and how the only proper atmosphere will be created – one in which the government and the opposition, through their political, economic and social programmes, fight on an equal footing for the favour of voters.

What is particularly concerning is that neither of them has a clear commitment and announcement of a concrete sequence of moves that would accelerate reforms in the area of the rule of law and the efficient functioning of market institutions, because that is a key issue and the most important condition for more serious economic progress and raising the standards of citizens.

It is essential for there to be clear, convincing and well-reasoned explanations that it is precisely these reform commitments that are crucial to creating a better life. Otherwise, it is realistic to expect that voters would rather prefer rapid, even modest, improvements to their economic and social position than insufficiently persuasive and time-consuming reform moves.

That’s why we shouldn’t be surprised by the recent short-term ad hoc measures that should – selectively and somewhat slightly – improve the financial position of employees in certain parts of the public sector, while again there is a lack of substantial reforms and the implementation of a tariff system that would permanently and transparently regulate wage relations for over 500,000 employees. The same goal applies to the announced tax incentive measures in the private sector as support to employers and increasing employment.

All of this has been seen already – the effects will be small and short-lived, instead of implementing a thorough tax reform that serves faster and sustainable economic growth. What is particularly dangerous in pre-election times is that the desire to win prompts not only a preference for short-term economic and social measures over reforms but also that various beneficial short-term measures go too far and exceed realistic possibilities.

Such moves in the period ahead would imperil the country’s financial stability and economic growth and would – in the absence of real and fundamental reforms – again compel the Government to make unpopular economic and social moves that are not in the interest of the majority of citizens.


 

Vladimir Gligorov
Economist and Political Scientist

Without Solutions, Without Dialogue

Election campaigns in Serbia traditionally promise the unfeasible and challenge everything. What is lacking is a real debate about precisely what the parties in power intend to do if they win a majority or what programmes the opposition is offering

We can usually see that elections are close to the promises of the parties in power and criticism from opposition parties. In Serbia, traditionally, the unfeasible is promised and everything is challenged. President Vučić announces investments of ten billion euros or more, a large part of which intended to improve citizens’ standards of living. And then there is the rise in salaries and pensions, but also additional increases for certain professions, where – alongside the usual promises to members of the security forces – educators and healthcare workers are having their turn. The message is that the government has worked so well that it has money for practically everyone.

The opposition in Serbia usually announces that it will change everything if it comes to power. There won’t only be jobs and money, but also justice and democracy, and all kinds of freedoms. And there especially won’t be any more corruption or nepotism, or employment and works along party lines.

Alongside that come solutions to all unsolved issues, starting from Kosovo to relations with the European Union and all foreign powers generally. This is partly because, as a rule, there is no public confrontation between the ruling parties and the opposition. Moreover, to the extent that there is some debate, that most often turns into mutual accusations, with the aim – particularly among representatives of the ruling parties – to respond to, for example, criticisms of corruption by offering both real and fictional examples of corruption among opposition leaders.

So, there is no real debate about what the ruling parties actually intend to do if they win a majority or what programmes the opposition is offering. Voters should already know that none of this will be done by the government, whoever comes to power. In democracies, there are two possible ways to impact on the government being more accountable overall. One is to vote for those already in power because that avoids the cost of change; and it is possible that opposition parties will prove even more money-grabbing if they come to power, especially if they’ve been out of power for a long time, which is almost always the case in Serbia.

The other way is to vote for the opposition from one election to the next, to ensure that the parties finally discipline themselves and begin competing with their achievements, if they are in power, and their plans, especially if they are in opposition. With democracy thus stabilised, everyone can vote in accordance with their interests or convictions.

In Serbia, as in most corrupt countries, parties in power have an advantage over the opposition, voters have invested in them, corrupting them in one way or another. As such, voting for the opposition occurs when it is estimated that investments in the government haven’t paid off. The ruling parties usually lose power after less than a decade. It is difficult to say whether this is such a turning point election.

On the basis of how much the ruling parties exaggerate on promises that facts – both economic and political – don’t bear out in any way, the election could be uncertain. A boycott, should the opposition opt for one, could be successful. And voters could see possible changes in electoral rules as a sign that the parties in power are unsure of their support, both at home and especially abroad. Whatever the case, the upcoming elections are likely to be just the beginning of a process that will result in a change in power.