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To be a decent capitalist in Serbia

Milan Knežević: Last year we spoke to four ministers from the government. I told Mr. Dinkić, for instance, that 8000 commission sale stores officially registered in Serbia, according to the findings of minister Dimitrijević, sell 550 million dollars worth of merchandise, without paying a single dinar of taxes. He turned to Mr. Ilić, who was the director of Tax Administration, and said: “Well, Vlado, is this possible?” Ilić replied that it was. Then one time we spoke with Mr. Jerinić, the director of the Serbian Customs Administration. I asked him do customs even exist, how is it possible for 8 billion dollars worth of goods to enter Serbia in two ways, one of which is plain physical smuggling, or getting the goods across the border. Who is filling those bazaars, how is it possible that so much merchandise can be found on 110.000 stands all across our country? There are those two ways, one of which is physical and factual, and the other is the biggest source of our misfortune, and there is lots of it – it is Chinese merchandise. This is constantly being falsely presented to the citizens, how we employers practically cannot stand cheep merchandise and healthy competition. And what is it really about? The merchandise imported from China is worth about 700 million euros, they pay custom duty for a tenth of its nominal value. I made a catalogue of protected prices to show the people that one kilo of cotton, which is a market commodity, costs 2.5 euros, when you process it and color it, you cannot get it for less than 6 euros anywhere in the world. You can make 2.5 t-shirts from it, which means that just the material needed to make t-shirt costs 3 euros, and then sewing – let’s say it’s the cheapest kind in the world – 1 euro, which means there is no producer price lower than 4 euros. When we made this catalogue of protected prices that the customs started to follow partially, we raised the customs revenue for 150 million euros. But what happened afterwards? It’s like science fiction, you know. You have to read Clark and Asimov, because you cannot comprehend it any other way. After customs, 90% of Chinese merchandise is sold on the black market. I suggested to Mr. Ilić, who was the director of Tax Administration, to add to the chart of accounts a class called “it just vanished”, because there is no other way to explain to some inspector where your merchandise is, you can only say that it dissappeared. I really see no other way.

They are already announcing that the rebalanced budged will have to be corrected in May and we are again acting like a family that knows where the money is kept, and everyone is stealing from each other, and then they are astounded when they find out it’s gone. It’s like some army drill, everyone is shooting randomly, we have no clue what its all about. As a businessman I don’t know what is going to happened tomorrow or the day after, what does it mean anyway, what kind of legal solution is that. What does this pointless social pact mean? The producers are in the most sacred trade of all – they create new value. There are 50 different goods and services in one of my products, the sewing thread, the needle, the button, the shoulder pad, the zipper, postage, electricity, sewage, piping – a businessman has many different expenditure items. This is why manufacture is the part of society that provides for its economic stability, that provides the long-term potential – through creation and the revenues from production – to service all other lines of work in the country. The accusations that are made in the papers these days are absurd – those dreadful employers are trying to turn a profit by laying off workers. It isn’t hard to  refute this argument with logic – why would anyone hire someone just so he could fire them? I really have to distance myself from a large number of my colleagues – those are really not my colleagues, but employers, the ones with the gold necklaces – but you should not view everyone the same way, based on this tycoon story, which is also a story in disguise. The tycoons took less than what this country looses in one day in the shadow economy. I don’t want to be confused with those people and I will not allow for 226.000 employers and over 160.000 owners of small and mid-size companies to be confused with them. We in the Association of Small and Mid-Size Companies employ 800.000 people.

Collective agreements do not exist anywhere in the world. There are sector agreements, because the sector agreement in the textile industry cannot be the same as the sector agreement in commerce and in Mr. Mišković’s company. They have nothing in common; you cannot apply the terms of one agreement to another industrial sector. Another thing is that the government is keeping a safe distance and it’s trying to get one thing with the social pact – I told this to Mr. Ilić, the Secretary of State – you are now trying to get credit from the employers and the unions,  so that we will tolerate your behavior in the future, regardless of how you behave. Instead of that, here are four measures, which you can implement in 60 days: reduce the shadow economy, register a certain number of employees, cut taxes and contributions for 20%, and bind us legally and we give you our word of honor that we will transfer that whole amount to workers’ wages. This would practically decrease the state budget for just 7%, but that will be compensated from the shadow economy and by registering the employees.

Instead of that, an extended collective agreement is adopted, with six new terms which are completely outside the Labor Law, and they boil down to the following – the labor unions and the Employers Union added the term that the state has to support them now and take 0.5% from all the employees in Serbia, which is 60 million euros per month. Who would be dividing that? Well – they say – the signatories of the contract, that is, the employers, the Employers Union, the labor unions, I guess the government too, I’m not sure if the government is taking part in it. Well… it seems they are eager to spend a little. I believe that minister Ljajić was set up, I can’t believe… he is a moderate politician. For instance, one of the terms says: “For the operation of the union the employer is to provide the following conditions: office space, the required number of furnished offices, the right to use other offices of the employer to carry out the business of the union, technical conditions, the use of company vehicle, the bookkeeping of the union organization’s finances.” Therefore, to make a long story short, you employers are going to get out of the companies and we are going to get in and run them. What good are you there, we’re here to run things, not you! But it seems to me that when you choose someone who knows very little or demonstrates personal interest to the institutions, then the government should say “no”. And rightly so, because it is illegal, but no one is there to propose something that could be a smart solution for a great number of employers, workers and for the government. Well, just so this sort of thing would not happen, we made our proposals yesterday in Politika, and we said that the 11 propositions which the Employers Union came out with were unconstitutional, illegal and senseless. For example, they are proposing to that the government postpones collecting VAT for six months. VAT is a holy economic category in every single country in the world. Imagine what would happen if you asked for the state to give up the thing which keeps it alive, what kind of serious partner does that make you?

Svetlana Lukić: I saw that some union presidents dramatically announced protests and they are not happy that prime minister Cvetković said that the implementation of this collective agreement is being delayed. They say that the unions would not renounce their already obtained rights, and those are recourses and meals.

Milan Knežević: Well, there already are recourses and meals, they are part of the wages, and this is not true. This is only an attempt to add an additional expense of recourses and meals. This means the new minimal wage would be raised to 15.000 dinars; right now it is 13.500 and this would be 15.000. No one can afford that anymore. On the other hand, some C.E.O. of a state-owned company who makes 3.000 euros a month would get a 70% recourse, which means he would get an additional 2.100 euros. He would get 20 euros a day for meals, which means that those who have plenty and those who do not create value get even more, while these poor people who work as sewing-machine operators in my factory 23 days a month don’t get anything. We are limited on one side by the shadow economy and on the other by the unregulated market, and on the third by the global crisis and on the fourth by the most expensive government and public spending in Europe. It’s easy for the unions to demand something that is not there.

The most dangerous thing in all this is that the unions will be the ones who decide who can pay and who can’t. You can only imagine the possibilities for racketeering. What gives them the right to judge my management of my capital? This is the basic principle of a state’s economy, there is no collective agreement there, this is our creation. It is just a cover hiding the interests of employers, unions and the state. I am especially irritated because I know that the ones who have nothing will get nothing. Take my example – my workers make 22.000 a month, the additional expense of recourses and meals would mean 20.000 more for me, that’s 45.000, and in addition to that the employer must pay for the worker’s transportation, and you have to earn for a month’s vacation, and for sick leave, and severance pay, and night shift costs… I think they have 26 items. The employer would have to pay 56.000 dinars if the recourses and meals were to be added to the minimum wage of 13.500 dinars. So this is an outright lie that all we need to pay is 13.500 dinars. A mathematical gobbledygook, which Pythagoras himself wouldn’t understand, is constantly being produced, and this is done intentionally. I tried to explain it to you three times already and it’s hard to explain, and there’s a reason why it’s hard to explain, because they are just dishing out populist slogans like we are expecting the French Revolution.

Take 200 million euros from the commission sale stores, take 300 million from the Chinese, take one part of one billion euros for 400.000 unregistered workers and then come to us and ask us for money. Then we will have the economic basis from the influx of a significant amount of capital, and I can sign an agreement that we will raise wages for 30%. On the one side you have impoverishment, you can’t raise prices. I’ve done experiments – you raise prices by 10% and you cut your sales in half.

If the government does not begin fulfilling its obligations, we will make an agreement on the political market with one of the political groups, we will hire experts who will represent us in the legal and economic sense and we will begin an election campaign. Posters will be in all the shop windows, we will put a flyer in every bag and hand it with every service and we will put an end to this situation where the providers of this state are in effect the most despised people in the state. We will not allow this to go on any longer. Big business is not reflecting the interests of this country. We will not be politically active, we will not become members of any party but we will support one of the parties which will let us suggest the bills that lead to this country’s prosperity. They will need to allow businessmen to be part of economic councils, as they are meant to be both in Europe and here, not those remnants of public organizations, those quasi-communist organizations like the Chamber of Commerce, which is a remainder of communism, and which at one time used to be a connection between the Central Committee and the economy. Today it needs to turn to market conditions, like it did in Slovenia, and members of the Chamber of Commerce should be the people whose interests it represents and reflects, and members should confirm that by paying a membership fee.

Chambers of Commerce are a peculiar phenomenon. They have 700 employees, they are using 300.000 square feet of office space in the best locations in Belgrade, they are better paid than the government, by the way. The president of the Chamber of Commerce has a higher salary than the prime minister. In effect, Chambers of Commerce are storehouses for washed out functionaries, the people who are waiting to be appointed to some position. We have really stepped into the realm of nonsense when someone who is paid by the government is expected to represent the interest of business. It is a twilight zone, they are appointing these people who don’t know the first thigh about business, and the economy is left aside to take care of itself. The president of the Employers Union is a man who doesn’t have a clue about business, he’s got one employee. This is why he claims he doesn’t pay VAT, because duty to the state is foreign to him. Instead of saying: “VAT is a sacred thing, I want to help create the economic conditions for my state to survive, and when it survives I want to change it” – no, it’s “give us a tax relief, postpone paying taxes.” It’s horrible.

This government is shelving its problems, putting off everything, thinking that someone else would do it. Someone else is going to pay off debts, deal with the balance-of-payments deficit and restructure public companies. They are following the logic that says – someone else is dying from my illness and I don’t care about them dying. We have no plan. Of course it’s absurd that the three richest people in America have more money than the GDP of 60 countries. It’s also absurd that we have one man as powerful as half the state, I don’t care who he is. It’s not about the amount of capital, but about him denying the chance of someone dying their hair, buying a new pair of shoes and buying something for their child. I’m not one of those people who project their social status through material things, I spend my time doing fine things, I associate with smart people, but as it turned out I have an influence on 5.000 human lives and that’s the only thing that’s stopping me from closing my company. I started my business so I wouldn’t stay a tenant – my wife and I – although we were educated not to be, so I wouldn’t be pushed to the margins. This is why I will call all my friends and my workers and we will take to the streets, us 300 employers, and we will present our demands to the government. If in 60 days they don’t start working on these demands and start solving those problems, we will start seeking cooperation with some political group and publicly say that we approached this group and start publicly agitating and trying to change the political reality and the balance of powers on the political scene and we will support those who support business and life.

Peščanik, Radio B92, 05.12.2008.