ZAGREB, March 22 (Hina) - Croatian President Franjo Tudjman on Monday addressed the Croatian public with an estimate by the state leadership on the economic situation and measures for ensuring further economic development. The Council
for Strategic Decisions of the Presidential Council discussed these issues at a session last week under the chairmanship of President Tudjman. Glancing back at the very successful period of Croatia's economy between 1994 and 1998, Tudjman spoke about problems that have occurred and which demand effective measures, such as illiquidity, disrupted banking system, extensive public expenditure, a decrease in production and growing unemployment rates. In order to solve the illiquidity problem, the Government, with the cooperation of the Croatian National Bank and with the full support of the Croatian National Parliament, must quickly, fully and determinedly implement the prepared programme of measures
ZAGREB, March 22 (Hina) - Croatian President Franjo Tudjman on
Monday addressed the Croatian public with an estimate by the state
leadership on the economic situation and measures for ensuring
further economic development.
The Council for Strategic Decisions of the Presidential Council
discussed these issues at a session last week under the
chairmanship of President Tudjman.
Glancing back at the very successful period of Croatia's economy
between 1994 and 1998, Tudjman spoke about problems that have
occurred and which demand effective measures, such as illiquidity,
disrupted banking system, extensive public expenditure, a decrease
in production and growing unemployment rates.
In order to solve the illiquidity problem, the Government, with the
cooperation of the Croatian National Bank and with the full support
of the Croatian National Parliament, must quickly, fully and
determinedly implement the prepared programme of measures which
include, the state's prompt payment of debts, changes in money
transfers, amendments to laws on bankruptcy and distress, as well
as systematic measures to collect taxes and contributions.
In order to protect contractors more effectively, the most
important thing is a more effective court system and all organs in
uncovering and preventing abuse and crime in all areas of economic
and social life, Tudjman said.
Until the state treasury is put into effect, it must be made a
practice that no large expense of any ministry or body in authority
can be realised without the authorisation of the Finance Ministry.
The same practice must be applied for non-budgetary funds.
In order to ensure the stability of the banking system, it is of
great importance to strengthen the function of control, not only at
the Croatian National Bank, but at all control mechanisms of the
state, including business banks and other state institutions.
Special attention must be paid to the control of financial
transactions with foreign countries.
Despite the fact that only a small section of the banking system is
directly endangered, it is important, from a psychological
standpoint, to prevent the spreading of mistrust in banks,
notwithstanding its origin.
Also, it is important to prevent the spreading of mistrust in the
general privatisation due to the machinations of several moguls,
and forgetting that about 75 per cent of businesses have been
successfully privatised and are contributing in the same ration to
the GDP, Tudjman said.
The state, the Croatian National Bank and all other appointed
organs must insist on the collection of debts towards banks, and
must not allow all those who had established banks and used them for
their own 'self-service', thus contributing to their fall and
spreading of mistrust into the banking system, to get away
unpunished.
It is very important to establish where the resources from the banks
have gone and undertake everything for them to be returned to their
owners.
It is undoubted that nobody is facing the consequences,
unfortunately, for misinformation about banks which occasionally
amounts to panic, unlike in other countries in the world.
The spread of rumours of one bank about other banks should also be
prevented, as this also causes mistrust, Tudjman said.
Regarding banks in difficulties, including those that should soon
end up bankrupt, we are pointing out the decision that savings
should be insured for clients.
Starting from July 1, payments of savings to 100,000 kuna
(US$14,397) will begin to be paid in banks for which bankruptcy
proceedings will be initiated, within the framework of the existing
savings insurance, and via a state agency.
The Government will discuss the possibility of additional
protection of savings investments to the level of the total
principle amount with an appropriate interest rate.
In solving the fate of banks which are in difficulties, bankruptcy
should be proclaimed where there is no possibility in their
rehabilitation, so that negative consequences for the stability of
the overall banking system could be prevented.
In any case, it is necessary to quickly and determinedly
consolidate the banking system.
The goal of the economic policy remains to endorse the stability of
the nominal exchange rate of the kuna, which is a predisposition for
overall economic stability.
The problems of public expenditure have for the most part been
inherited from past times, and influenced by demographic, war-time
and other social circumstances. However, it is indubitable that the
issued sum of rights and benefits by far transcends the current real
possibilities of this country.
An outstanding example of the influence of these factors are
pension funds, via which other social problems were solved, that do
not belong in this system. This is best illustrated by the fact that
only 16 per cent of pensioners are retired with a full work-life.
In planning public expenditure, especially infrastructure
investments, we must turn to a policy of concentrated efforts, that
is, to decreasing the number of planned projects. We should discuss
the possibility of savings in the budget and financial plans of nn-
budgetary funds, taxes and contributions should be paid regularly,
with punitive measures against those evading valid laws.
In order to prevent the avoidance of paying contributions on
salaries for pension and health insurance, payment should be
extended to author's fees, except in science, culture, art and for
students.
The decrease in industrial production in the past seven months and
other mentioned indicators point to the fall of economic
activities.
Although one contributor to this is the global economic crisis and
recession in countries that are our most important trade partners,
it is indubitable that domestic factors have contributed to this
for the most part (illiquidity, blocked banks, high fiscal burden,
increase in all production expenses).
In order to stop such trends it is necessary to undertake adequate
steps, notwithstanding the fact that their effect cannot be
expected quickly, Tudjman.
To increase production and employment, it is necessary to see to it
that exports grow quicker than the GDP, the rate of national savings
should be increased, the structure of national investments should
be changed in favour of activities which have a direct production
effect.
Furthermore, it is necessary to find ways of an organised approach
to a modern transfer of technology.
We must also find ways to attract foreign, particularly direct
investments.
To this effect, we must immediately begin a systematic
privatisation of public and tourist companies, Tudjman said.
In special circumstances of stimulating foreign investments of
national significance, the Croatian Government has the right to
allocate state land for free, to allocate and construct
infrastructure, and to the capital share in the given project.
Speaking about measures to increase exports, Tudjman said more
needed to be done to increase resources for credits and
compensation of expenses of customs barriers, especially by
stimulating Croatian recognised products.
Unaccounted for import benefits must be rescinded, such as for the
import of cars, and import benefits should be given to the import of
cars into which Croatian parts have been built.
Customs tariffs for machines and other equipment not produced in
the country must be decreased or annulled to spur domestic and
foreign investors.
The development of tourist and export industry should be
systematically stimulated.
Contributions to stimulating the level of national savings must
come from reformed funds of social and pension insurance, systems
for the financing of housing construction and life insurance
systems.
Support from foreign, especially direct investments is not only
unavoidable, but is of primary importance at the current level of
savings.
However, in order to attract foreign investors, besides the
development of concrete benefits in tax, industrial, customs and
infrastructure policies, we must expedite all integration
activities (World Trade Organisation, Central European Free Trade
Agreement, European Union) in order to expand the market.
In enabling foreign investments and in the system of public works
and purchase, we must not allow domestic bidders to lose jobs at
competitions in the country, when they are competitive with foreign
bidders.
Concerning national benefits, we must insist on all investments
financed from the budget, public funds and public companies.
The import of modern technology must be stimulated, because without
it, we cannot satisfy the professional and life needs of our young,
educated people, nor prevent their leaving abroad.
Breathing life into industrial activities will indisputably lead
to a decrease in the rate of registered unemployment. However, it
should be openly stated that due to its structural character, this
problem will not be solved quickly, but we should aspire to lower
the unemployment rate to between seven and eight per cent in the
next period.
At the same time, along with fighting against all forms of
corruption, bribes and thievery, we must fight against all forms of
creation of an anti-enterprise climate which has occurred due to
certain omissions in the privatisation process and due to the
unprofessional conduct of a part of business people.
Despite all difficulties and crises, the state leadership is of
firm conviction that all these occurrences can be overcome
relatively quickly, if all state organs and all social and economic
subjects quickly, effectively and responsibly implement the
established goals in all areas.
For every deviation, both institutions and individuals will have to
bear the most serious consequences, Tudjman said.
(hina) lml