Miodrag Šajatović – New Government: Carefully Monitor the Relations of the Trio Plenković, Z. Marić, Dalić

A quick reading of the program of the Government of the Republic of Croatia for the term 2016 – 2020, which the mandate holder Andrej Plenković submitted to the Parliament, indicates a diplomatic handwriting. There is a noticeable absence of any numerical indicators (except when it comes to EU funds) and many euphemisms (for example, ‘privatization’ is not mentioned, but rather the establishment of ‘optimal models for further disposal’ of companies in state ownership that are not strategic). It is said to be a document that is a ‘comprehensive and coherent package of measures’, but this is fairly relativized by the announcement that a national sustainable development strategy will begin to be developed (which is part of the Bridge program).

In the Shadow of ‘Soap Operas’ When it comes to the development of the strategy, things have aligned. Martina Dalić, the future Minister of Economy and Vice President responsible for economic sectors, has experience with strategies. Back in 2006, as a State Secretary, she developed the Strategic Framework for Development with her colleagues. Unfortunately, during the time of the then Sanader government, there were other priorities than strategic thinking about the future of the country, so Dalić’s work was consistently ignored. Now, Martina Dalić has the opportunity to finally produce a long-term strategic document that will not be ignored from the second (official) attempt. The soap opera approach to the selection of the new government (discussions about the suitability of candidates for the ministers of culture and education…) will likely overshadow existential issues again in the first hundred days of the new Croatian government. This cannot be avoided, but it will be significant for the business community to closely monitor the activities of Martina Dalić. Broader: the triangle of Prime Minister Plenković – Finance Minister Marić – Economy Minister Dalić. Or even broader: the quadrilateral in which the fourth corner is for the Bridge member.

Prime Minister Plenković has remained on five key points in the Government’s program, which he first presented at the recent Lider conference ‘Day of Big Plans’: 1. comprehensive tax reform, 2. investment in growth generators, 3. increasing the efficiency of institutions, 4. strengthening the sustainability of public finances, and 5. reform of the education system. When it comes to comprehensive tax reform and the sustainability of public finances, there should not be major disagreements between the Finance Minister and the Economy Minister.

Controversial Growth Generators? A problem could arise with the second key point, which involves investment in growth generators. The program mentions agriculture, tourism, industry, and everything that goes for export. This part has not actually been detailed. It is clear that they were waiting for the new Minister of Economy. Now, knowing the fundamental economic orientation of Martina Dalić, if it has not changed in the meantime, she is for a liberal approach. Simplified: improve the environment for the business of all entrepreneurs in the country, and let the winners be those who will best utilize it in the market. However, the proposed program of Plenković’s government contains many measures that still include forms of state selection of those to be encouraged. After all, the European Commission insisted that the project of smart specialization define branches and activities that have growth potential. EU funds are also a form of redistribution and interference in the ‘invisible hand’ of the free market. Furthermore, in the Government’s program, there are several places where the intention of the new government can be read to finally strengthen oversight over the quality of imported goods to help the survival of domestic producers in the domestic market. It mentions ‘projection of domestic needs and possibilities of domestic production’.

It will be interesting to see what is meant by ‘full coordination of the Government and the Croatian National Bank (…) in the function of economic growth’. Is this a tactical matter, or will the Croatian National Bank be legally required at some point to care for GDP growth in addition to price stability? It will be interesting to see if the reform of public administration will insist on changing the law that would allow for flexibility within the state administration. The expertise and determination of the future Minister of Economy are not unknown. Besides being the first woman Minister of Economy, she seems to have professionally matured to take on the role of leader of the team of creators of the economic policy of the new government. She has also been in the real sector (unfortunately, in banking, not in a manufacturing company that works for export) and is now in a position to show maturity and synthesis of the economic school to which she belongs with the reality of managing the national economy in conditions of globalization. It might be wise for the Government to present a refined program within a hundred days.