Vučić: Statistically, private companies are more efficient, and this is not a coincidence

State-owned companies should offer stability, while private ones can focus on profit maximization, said Vinko Belak, a professor at the Faculty of Economics in Zagreb, during a lecture titled ‘The Role of State-Owned Enterprises in the National Economy – Driving Development and Innovation’ as part of the Lider conference ‘State-Owned, but Efficient’.

The perspective on the role of state-owned enterprises in the national economy and on efficiency in general should be fundamentally different than before: the belief that the invisible hand of the market will resolve socio-economic relations on its own seems unrealistic today, and the advantages and disadvantages of all forms of enterprises should be reconsidered, Belak established.

Speaking about what needs to change in thinking, Belak stated that each individual form of ownership and enterprise does not fit all practical situations, and that private enterprises better serve some purposes, while state-owned ones serve others. To achieve this, all forms of ownership and enterprises must become equal, and each of them should be placed in a situation where it most efficiently fulfills its function.

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– With the accelerated development of robotics, we are expecting a loss of many jobs in the future, leaving a large number of people unemployed. In other words, the economic problems of society cannot be solved without the engagement of the state, he emphasized.

– I have nothing against private companies; they have the right to be profit-oriented. State-owned companies should offer stability, while private ones can focus on profit maximization. If you do not have a good sector of state-owned companies that maintain stability, who will buy what we produce?, Belak wonders.

Why not place state-owned companies in areas dominated by private companies – Belak continues – research shows that people prefer to work in state-owned enterprises. According to previous experiences, healthy competition between the state and private sectors has brought technological advancement and stimulated innovation in both. Some things, such as public goods, really must remain in state ownership. Of course, there are flaws in state-owned enterprises, but private companies also have their flaws, especially when it comes to meeting social interests, said Belak.

Speaking about whether state firms can be more efficient than today, Belak asserted that this is possible by introducing a more efficient management model and placing the right people in the right positions, as well as preventing excessive interference from external unauthorized structures in the management of enterprises, but that this process in Croatia has remained only words.

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– We still hear statements that the state is not a good manager and that everything should be privatized. How is it that the state, as a poor manager, solves the problems of private individuals as good managers?

Looking at options for the public and private sectors in the 21st century, Belak stated that state entrepreneurship in the future should become something normal, just like private entrepreneurship. Given the global changes that are also affecting us, alongside a strong private sector, Croatia needs a strong state sector as well, concluded Belak.

Vučić: Change of government ‘cleans out’ Management and Supervisory Board

The lecture titled ‘Innovation in State-Owned Enterprises – A Good Practice Example’ was held by Tomislav Vučić, the CEO of HPB, who spoke about the experiences of that bank in state and private ownership.

– Statistically, private companies are more efficient, and this is not a coincidence. Private owners are more focused on generating profit, while the state is more focused on social benefit. The reasons for the average inefficiency in state companies are various primary interests of the owners, lower employee rewards, and the complexity of making political decisions, said Vučić.

– Discontinuity is a problem because with almost every change of government, the Management and Supervisory Board of the company in public ownership is ‘cleaned out’. The consequence of this is also a problem in recruitment; few will come to work for a lower salary and in a more uncertain position, Vučić explained.

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Speaking about HPB as an example of good practice, Vučić emphasized that in the first phase they achieved quick wins and picked the ‘low-hanging fruit’, and therefore an active role of the owner was not necessary, but they allowed the management to operate according to professional standards. The second phase is an attempt to turn good into excellent, he pointed out. He noted that strategic long-term measures, investments, and strengthening of human resources are key segments that require capital and investments that will enable growth in the digital age and strengthen management with experience in new banking trends.

– From a bank that was realistically poor, we have come to a bank that can cope quite well with international banks.

He noted that HPB lost momentum in light of the acquisition of Jadranska banka, but not irreversibly. He also stated that he hopes this process will be completed soon, but that it will require the owner’s assistance.