Institutions, creativity and social consciousness for growth
Outlook 2020 issued by the Managers' Association of Slovenia in December evaluates the Slovenian economic situation and policies. Its purpose is to enable a constructive dialogue among managers and decision-makers concerning development issues in Slovenia and the EU in the broader international context. Outlook editor-in-chief Jurij Giacomelli believes that beyond the short-term recommendations for improvements in the business environment suggested by the competitiveness rankings by distinguished think tanks, the answer lies in the following triangle: institutions, conditions for creativity, and the choice of the right direction. "These seem to be bound by an invisible "institution", a convention called a "development agreement" by Outlook. It may be used to cleverly move a country to a higher level of social consciousness and materialise the chosen path of development to preserve and strengthen social well-being. It is inevitably a generational challenge, which Slovenia has not yet accepted wholeheartedly," explains Giacomelli in his interview.
Where does Slovenia stand in terms of competitiveness?
A Slovenia's competitiveness is rated in both rankings; the World Competitiveness Centre of the Institute for Management Development in Lausanne and the World Economic Forum (WEF) in Davos. Setting aside the small size of the market, which is an objective restriction, Slovenia's weakness lies in the operation of its institutions. Low administrative efficiency, the functioning of the rule of law, a weak financial system, an insufficiently flexible labour market, the taxation of labour, and the fragile healthcare system may all be deemed the result of the operation of institutions that are too weak to allow us to rank higher. Not even above-average results in primary and secondary education can change this conclusion. Another systemic deficiency is the poor connection of our decision-makers to their counterparts around the world, which is stressed in the IMD report.
No competitiveness ranking or report based on it shows the path of development a country should move along to boost its competitiveness and social well-being. On the basis of the most reasonable comparisons with countries ranked higher than Slovenia, we may find that an increase in competitiveness is the result of long-term social processes leading to concurrent improvements in several areas. It is a generational challenge which needs to comprise international positioning, the adjustment of institutions, and constant checks and adjustments on the chosen path of development.
What countries are on top of the Competitiveness Ranking?
Perhaps it may seem that the highest positions in the competitiveness rankings are always reserved for the same winners: Singapore, Hong Kong, the USA and Switzerland, among others. But of the European countries, Ireland has made the most progress in the IMD ranking, climbing to seventh place, trailing the Netherlands and followed by Sweden and Denmark.
In this year's IMD ranking, Slovenia ranks 37th, the same as last year.
A lack of common ambition is frequently attributed to Slovenia trough the newly published Outlook. We can read the findings of Professor Mramor and his colleague from the School of Economics and Business of the University of Ljubljana, Professor Jože Sambt, supported by the forecast of economic trends made by Veljko Bole. How do you comment it?
Slovenia may be experiencing economic stability, a relatively high employment rate, and better resilience than before the crisis for it to preserve growth in economic activity and productivity in the years to come, when the EU is expecting an economic slowdown; however, the country is not ready to face the tightening conditions to preserve its well-being imposed by demographic trends and the global transition to technological sustainability, constricted by internal deficiencies: immutability, resistance to change, refusing competences, lack of self-criticism, and an unplanned approach to problem-solving, which frequently results from avoiding responsibility.
Let me give you some examples. The last prime minister to openly speak of reforms was Borut Pahor (2008-2011), and the last major reform in Slovenia was a pension reform which entered into force in 2011 and "legitimised" the Democratic Party of Pensioners of Slovenia (DeSUS). Since then, we have had quite a few intervention acts and minor amendments to the pension system - which was largely inherited from "former times". On the other hand, healthcare is being constantly reformed by unplanned administrative measures, while we reject wider systemic solutions which would include the insurance sector and provide new competence. The banking system has been "changed" under outside pressure and the threat of a collapse, but instead of digging deeper into the financial system and launching initiatives for the development of the capital market, particularly of medium-sized companies, we keep seeking "culprits" among those who worked on solutions and not for the triggering of the crisis that impoverished the country for at least ten years of progress; a crisis experienced at the same time by comparable EU member states such as the Baltic countries or the Czech Republic and Slovakia.
Other examples include excesses in management and corporate governance in companies from before the crisis, which finally accumulated in non-performing loans in bank balance sheets and were back in the form of "invasions" in Petrol or Telekom. The post office, an entity which guarantees the interconnection of information systems in any country, is a saviour of other companies of national importance (Mladinska knjiga, Intereuropa) on the one hand, while on the other, the implementation of its public function is under pressure to produce short-term profitability and dividends. After a decade spent building motorways, the country faces a general traffic jam, a dysfunctional railway infrastructure and, in the wake of the final bankruptcy of Adria Airways, limited air transport connections with the world; not to mention the absence of any sensible regulation of information-providing media during the digital transition. It is only in ecological disasters (Kemis) and civil initiatives (in the case of Lafarge or Termit) that systemic deficiencies are unveiled. The list goes on and on, but let us just add that, typically, each such "problem" sooner or later turns into an emergency task of the ruling government, which eventually takes on the duty to assume responsibility for it, often when it is too late.
How can a dialogue about development be held in such an atmosphere?
This could be an effective way to introduce Žerdin's discourse from the Outlook. The issues of meritocracy and the rule of law are pointed out as fundamental preconditions for a dialogue on development that should result in a development agreement; target institutions and fundamental centripetal forces of social cohesion. Best practices of Slovenian management are the main consideration of the Managers' Association, the publisher of this publication, and are therefore placed as the main contrast to the undesirable phenomena described above. These practices are distinguished by the progressive leadership of award-winning individuals and teams, their strategic mindset, and the knowledge and skills to create new value and a positive deviation from the average through an open dialogue and in transparent organisational structures, which are branded as the fragmentation of "feuds" between small social "annuitants" who perceive limited goods as absolute, and the complete management of a country is equated with division, not creation.
For this reason, we wonder: do these individuals receive enough attention and understanding from the public, and the support of institutions and, most importantly, followers? Best management practices are introduced in the Outlook by Saša Mrak, Executive Director of the Managers' Association.
Slovenia has also several ambitious goals, but are they discussed enough?
Where we wish to go is important. The Chamber of Commerce and Industry and the Government of the Republic of Slovenia have made it their mission for the Slovenian economy to halve the backlog in added value per employee in comparison with Austria by 2025. Additionally, the Slovenian Development Strategy 2030 was devised according to the bottom-up approach and sustainable development principles, and defines measurable objectives and their pursuit. It is the basis for the Smart Specialisation Strategy, which is the fundamental document for the allocation of measures and initiatives for innovations focused on development objectives. Following its adoption by the government of Miro Cerar, no significant public discussion on its implementation has taken place. How to sensibly update and amend it has been debated even less. Let us remind ourselves that its adoption was accompanied by uncalled-for criticism and even ridicule. Does it even have an administrator? Or better still: whoever has the courage to be its administrator should come forward!
Therefore, what should be the Slovenian development path?
In 2019, Outlook expressed the need for a development agreement and promoted dialogue between social partners and other stakeholders, highlighting five aspects. Firstly (1), we need to maintain and increase the employment rate despite the ageing population; and (2) we need to radically boost investment in education and science. We should follow the example of Ireland, Estonia or Finland, nations that have managed to pull off a generational breakthrough and achieve competitive positioning through investment in the knowledge of their people and newcomers. Good schools, institutes and development centres foster investment in innovation and start-ups, which is a lever for redirecting the talent drain to a developmental influx. We should add that education is a critical area in Slovenia, particularly due to the lack of lifelong learning, which is the only thing that supports the desires of workers for flexibility.
Sustainable transition, and technological skills and knowledge must be promoted (3), since this is about pan-European competitiveness, not only Slovenian competitiveness. This is followed (4) by the establishment of an efficient judicial system, which will safeguard agreements and private property, and distinguish between public and private interests. Finally (5), a thorough transformation of the tax policy and initiatives, and the harmonisation of regulatory measures, are required to foster convergence in the other four areas.