Miodrag Šajatović: Planning in the Time of Corona – Mistakes Are Expensive

Preparations for the twelfth Lider conference 'Day of Big Plans' (Zagreb, September 23, 2020) are in the final phase. The interest of entrepreneurs and managers is even greater than in previous years at this time. This is not surprising. It is an event that has served wise company managements for years as an important guideline on what plans to develop for the next business year. At the 'Day of Big Plans', less is said about what should be done, and more emphasis is placed on inputs of what could realistically happen and how that could affect specific businesses.

A cyclical crisis had to come. A year ago, a comment appeared in Lider calling on businessmen to develop plans in conditions of a 30% drop in revenue. The corona crisis has, a year later, presented just such a challenge.

In many companies, the middle management layer nostalgically speaks of the good times when budgeting for the next business year was folklore. You send a proposal for a 3% growth of your sector to your superior. He responds with a request for a 7% growth. You drag it out for several weeks and then find yourself at 5%. The digital revolution, and especially the corona shock, have fundamentally changed things.

Exporters Assess More Easily

Plans are being reconsidered almost every week. Those who developed controlling in peacetime conditions find it a bit easier now.
There seems to be a simple solution. Three scenarios are made: optimistic A, likely B, and pessimistic C scenario. Unfortunately, for industrial companies that have warehouses of raw materials and supplies on one side, and logistics and finished products on the other, this is not so simple. This has also been shown in the HoReCa channel. A considerable number of companies bet on an extremely poor tourist season, and when tourists did come, they could not overnight turn plan C into plan A. Some lost long-term customers because they were unable to serve them. Industrial companies that predominantly export are still managing to assess inputs for planning months until the end of the year and for the first half of 2021, by which time, presumably, some vaccine should start to suppress the COVID-19 pandemic.

Those focused on segments of domestic personal consumption, government consumption, investments, and imports are eagerly awaiting the budget proposal for 2021. Along with that, the recovery plan that Prime Minister Andrej Plenković’s government is required to present by the European Commission as a condition for the start of drawing funds from that infamous aid package of 22 billion euros.

In this issue of Lider, we have a topic on how preparations for the recovery plan are progressing. We received information that 13 ministers and one state secretary are working on it. As far as is known, there is no one from the business sector in the working group. Nor from the scientific community.
It will be a great surprise if the ministerial team impresses with the recovery plan. This is still a government of continuity, and in the last four years, no plan has emerged from Banski dvori that has left the business community breathless.

The reasons are multilayered, but one of the main ones is that there is no institution in the state apparatus that would provide the Prime Minister and ministers with a quality basis for writing a recovery plan that would not just be a list of what officials in ministries remembered at the last minute. The Institute for Water is just being established. There is no consideration for an institute for national development planning.

In the Function of Others’ Recovery

Over the years, entrepreneurs and managers have learned that the absence of ambitious state plans is also important information. They have learned to be cautious, not to shift into fifth gear of development, not to incur debt. To be conservative and preserve what they have painstakingly built despite everything.

Governments have so far played on increasing personal consumption, government consumption, and state investments during the crisis. They have left the export-oriented industry to fend for itself. The result? Personal consumption, government consumption, questionable investments, and tourism are not and will not be able to raise GDP as much as needed for us to stop being the slowest member of the EU.

Some fear that a low-quality recovery plan could be sent back from Brussels. And that we will not receive a billion or two to start with. There is no need to worry. The local recovery plans are flat and usually provoke the import of equipment from countries like Germany or Austria. It will be a great surprise if the Croatian recovery plan this time is not just in the function of recovering EU member states that have quality state planning.

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