An Article published in The Slovenia Times in October 2010
Interview: Darja Radić, Minister of the Economy
It was in July that Darja Radić took up arguably one of the hardest jobs in government: that of Minister of the Economy. It is she who is now charged with addressing the many challenges facing Slovenia’s finances – with finding ways to boost competitiveness; with working out how to help the country out of the economic slump; with helping the nation throw off the last shackles of its pre-free market days. Tough problems to be sure, but ones Radić says she is working hard to resolve.
You have always said one of your key priorities is to improve the competitiveness of the Slovenian economy. What concrete measures have already been introduced to achieve this, and what further measures do you plan?
At the beginning of the term, when Matej Lahovnik was the minister [and Radić was serving as state secretary] we got caught in the economic crisis so we were somewhat disabled in our plans. Nevertheless, we offered companies incentives for investments in the development of new products. At the moment we have an open call for the establishment of development centres. In those technology areas where Slovenia already has companies with skills and competencies, we want to create strong development centres which will take Slovenia to a higher technological level. We will improve the competitiveness of the economy if we create a business environment in which high-tech development companies feel good. That is our aim: with the tender for the development centres we will make a push in these technology areas and with a network of incubators in technology parks we will co-finance beginners and start-ups.
The third [main initiative] is an attempt to relieve tax contributions on the highest wages. This will be a great incentive for foreign investors to move their research and development (R&D) departments here.
All surveys of the business environment in Slovenia highlight labour market rigidity, high taxes and contributions and complex paperwork as the main obstacles to FDI. What is your response to that?
I absolutely agree and so we are trying to reduce rigidity, to achieve more flexibility in employment, make progress on high taxation and so on. I am trying to introduce this cap on contributions where after a certain amount of salary, contributions remain the same. Currently they grow in line with wage growth.
With regard to administrative barriers, we try to improve the situation and it gets better each year. We make slow progress, but progress we make.
You have said in interviews that the withdrawal of the state from the economy has been too slow, saying that you are very much in favour of privatisation. And yet we are living in times when, in many countries, governments are having to interfere in the economy and investors are basing their decisions on the actions of governments. How can this be balanced out?
Personally, I am a very strong advocate of privatisation. I think the separation of economy and politics is the right way. It is not a problem if the state owns a few firms but this should be viewed more from an economic, strategic perspective. The country needs to have some ownership as some kind of back-up. But Slovenia has a number of investments which are not strategic but are instead traditional companies that are usually poorly managed as they are located far from the state administration. These things must be sold as soon as possible and left to those who know how to manage them.
On the other hand, in times of such severe economic crisis it is almost impossible for the state to leave the economy on its own. Even private companies have increasingly been turning to the state for assistance. We believe that in cases where the company still has a perspective to succeed, especially if it is a large company with many jobs, the country may intervene. This is a short-term contingency measure for a company to survive the crisis.
An agency for state property management is being formed now. I am confident that, once it is established, we will be able to quickly assess what needs to go to the private sector and what is worth keeping state owned.
Would you agree that privatising some state owned companies now appears to be a necessity rather than a choice?
It is necessary to obtain fresh capital and thus get new drive for the firms that are still worth something. Our task is to provide owners who will buy those companies and manage them well. If they are foreigners, so be it. The money remains in Slovenia and the business as well and that is all that matters. We are a small nation and perhaps a little more sensitive to these things, because we know that within a major integration our identity may become lost. But if we are strong, if we show what we know, our identity will remain recognisable in the broader social structures.
Some say that international financial institutions have little or no confidence in Slovenia due to failed attempts at privatisation such as Mercator and Telekom Slovenije. How do you respond to that?
The reason for the establishment of an agency for state property management is the professionalisation of management of government property. There will be a team of people with the knowledge and experience of company management and they will deal with these things professionally. When state property was allocated to ministries, problem was the politics present at the ministries – political interest quickly comes to play and political decisions are made that are not always optimal. I think in the future, Slovenia will be friendlier to foreign investors in this respect as well because there will be competent people on the other side of the deal.
In August there was an increase in electricity tax which undoubtedly will increase running costs for companies. Are there any concrete plans to let businesses »breathe« to help them to come out of the crisis?
There is nothing to do to help the economy at this stage but to let it breathe. To leave it alone, not burden it with additional taxes.
The excise taxes were confirmed together with the adoption of the revised budget for 2010. According to the original law the excise duty on electricity should rise by six percent but we made an agreement with the finance minister to reduce it to three percent. The law permitted a reduction by half so that is what we did.
Are there any sectors which you think would particularly welcome know-how or capital from foreign companies?
The tourism field has virtually no serious investments and it would be interesting to have a foreign one in order to set an example and comparison for domestic companies. A foreign investor can bring new business models, new skills and new way to conduct business and that usually encourages a positive shift in all other Slovenian companies.
We certainly prefer those investments that bring high added value rather than investments which open a large number of jobs. This used to be our primary goal. Now the focus is elsewhere, at the added value. We do not want to be the country with cheap labour, but the country with conditions for research and development centres.
A quarter of ministers – 5 out of 19 – are now women whereas there were only three female ministers during the previous government. What do you think about this presentation of women in the government?
I always defend mixed teams, because they are usually more successful. I think this is because women and men differ in thoughts and reactions. It seems men are more impulsive and see only one step forward while women are more systematic, more analytical and visionary. If we were just a group of women, we would be too slow, too defensive. If there were only men they would not think things through or see any risks. A combination of both is good so sometimes men can push women forward a little, or vice versa, women hold men back.
