Govt. reveals "measures for reform of economy"

BELGRADE The government has announced it will reduce the salary mass, raise the lower VAT rate to 10%, cut subsidies, make savings on goods, and use "cheaper loans." In addition, the government measures presented on Tuesday by Finance Minister Lazar Krstic envisage "changing the business environment." Govt. reveals "measures for reform of economy" Krstic unveiled the measures during an open session of the government, held in Belgrade. Starting in 2014, public sector salaries now over RSD 60,000 (EUR 525) will be reduced by cutting 20 percent of the amount over 60,000, and those exceeding RSD 100,000 (EUR 870) by 25 percent, according to the same calculation. Krstic explained that this means that a person now earning 70,000 net - will be receiving 68,000 net after the measures have been introduced. Referring to the latest data from the register of public sector employees, the minister said that there was "still no accurate and definitive data" on the number of employees in the sector, and that it was "between 660,000 and 700,000 people." He announced a significant reduction of state subsidies, which will bring the biggest savings in the budget and the completion of privatization of 179 enterprises and restructuring of large public systems. He said that subsidies provided by the state were twice as high as "in other countries." Krstic then noted that Serbia was "going to the EU" and that it cannot provide state assistance to any other sector except agriculture and railways. Krstic said that the proposed measures were primarily related to the economy, however, the open government session was not attended by Minister of Economy Sasa Radulovic. Radulovic was instead attending a meeting in the Serbian Chamber of Commerce on ways to "professionalize" the work of public enterprises. Krstic announced that the lowest VAT rate would be raised from eight to ten percent for "non-existential products." The increase will hike the consumer basket to RSD 65,450 from the current 65,000. "It should provide around EUR 200 million annually, while another EUR 150 million would go into the budget by reducing the gray economy, smuggling and illegal tobacco trafficking," he noted. Besides the activities against the gray economy, Krstic also announced the introduction of standardized electronic forms, online control of fiscal receipts, more control on the ground and a thorough reorganization of the Tax Administration. Another of the announced measures mentioned is the use of cheaper foreign loans, which the minister said would be obtained "primarily via bilateral contacts and diplomatic relations." "In this way, we admit that we are sick and start the recovery using the measures and political unity behind the proposed moves," said Krstic. He also told the government session that Serbia's economic and fiscal policies over the past ten years "had been irresponsible and lacked transparency," and added: "The problem was not that Serbia's debt was growing, as all countries increase their debt in times of crisis, but the fact that the funds were used to cover current expenses, while there were not enough brave moves necessary for economic recovery." Krstic announced structural reforms to would be further discussed in 2014, while the effects of the measures are expected in 2015. The Serbian government will invest efforts to improve the business environment considerably, which is why amendments to legal regulations, primarily the Labor Law, will have to be adopted, Krstic stated on Tuesday. He said that changes in certain laws, especially the Labor Law, were necessary so as to ensure "more flexible" hiring and sacking of workers. He noted that Serbia will have to change the model of infrastructural investments, which means that the government will not longer be able to act as the financier. “One of the models will cover partnerships between the public and private sectors, and we will try to make sure that local companies do the biggest share of the work,” Krstic said. He noted that the procedures for issuing construction permits would be simplified and that the Finance Ministry will have to significantly change the regulations concerning fees and make the entire process more transparent. He said that this will help Serbia improve its business environment, which is very important for attracting foreign investments. Announcing the necessary increase in the social protection spending when it comes to the most vulnerable population, the minister said it would be by 50 percent and amount to EUR 60 million, and that "the reform of the public administration would follow." The pension system reform would also continue, "along with a further indexing of pensions in 2015 and 2016 of 0.5 percent, twice a year." Krstic said the government planned to, by 2020, move the retirement age for men and women closer, so that women would retire at 63, and men when they are 65 years old. The budget deficit is now 4.7 percent, while IMF estimates range up to eight percent, he revealed. At the same time the public debt ranges from 58 to 60 percent, Krstic warned. "Without these measures, we would go bankrupt in the next two years," said Krstic. The minister also announced another revision of the state budget for 2013, "because revenues will be reduced by 20 billion" compared to the planned figure. (Tanjug) B92 Tanjug

Govt. reveals "measures for reform of economy"

Krstić unveiled the measures during an open session of the government, held in Belgrade.

Starting in 2014, public sector salaries now over RSD 60,000 (EUR 525) will be reduced by cutting 20 percent of the amount over 60,000, and those exceeding RSD 100,000 (EUR 870) by 25 percent, according to the same calculation.

Krstić explained that this means that a person now earning 70,000 net - will be receiving 68,000 net after the measures have been introduced.

Referring to the latest data from the register of public sector employees, the minister said that there was "still no accurate and definitive data" on the number of employees in the sector, and that it was "between 660,000 and 700,000 people."

He announced a significant reduction of state subsidies, which will bring the biggest savings in the budget and the completion of privatization of 179 enterprises and restructuring of large public systems. He said that subsidies provided by the state were twice as high as "in other countries."

Krstić then noted that Serbia was "going to the EU" and that it cannot provide state assistance to any other sector except agriculture and railways.

Krstić said that the proposed measures were primarily related to the economy, however, the open government session was not attended by Minister of Economy Saša Radulović.

Radulović was instead attending a meeting in the Serbian Chamber of Commerce on ways to "professionalize" the work of public enterprises.

Krstić announced that the lowest VAT rate would be raised from eight to ten percent for "non-existential products."

The increase will hike the consumer basket to RSD 65,450 from the current 65,000.

"It should provide around EUR 200 million annually, while another EUR 150 million would go into the budget by reducing the gray economy, smuggling and illegal tobacco trafficking," he noted.

Besides the activities against the gray economy, Krstić also announced the introduction of standardized electronic forms, online control of fiscal receipts, more control on the ground and a thorough reorganization of the Tax Administration.

Another of the announced measures mentioned is the use of cheaper foreign loans, which the minister said would be obtained "primarily via bilateral contacts and diplomatic relations."

"In this way, we admit that we are sick and start the recovery using the measures and political unity behind the proposed moves," said Krstić.

He also told the government session that Serbia's economic and fiscal policies over the past ten years "had been irresponsible and lacked transparency," and added:

"The problem was not that Serbia's debt was growing, as all countries increase their debt in times of crisis, but the fact that the funds were used to cover current expenses, while there were not enough brave moves necessary for economic recovery."

Krstić announced structural reforms to would be further discussed in 2014, while the effects of the measures are expected in 2015. The Serbian government will invest efforts to improve the business environment considerably, which is why amendments to legal regulations, primarily the Labor Law, will have to be adopted, Krstić stated on Tuesday.

He said that changes in certain laws, especially the Labor Law, were necessary so as to ensure "more flexible" hiring and sacking of workers.

He noted that Serbia will have to change the model of infrastructural investments, which means that the government will not longer be able to act as the financier.

“One of the models will cover partnerships between the public and private sectors, and we will try to make sure that local companies do the biggest share of the work,” Krstić said.

He noted that the procedures for issuing construction permits would be simplified and that the Finance Ministry will have to significantly change the regulations concerning fees and make the entire process more transparent. He said that this will help Serbia improve its business environment, which is very important for attracting foreign investments.

Announcing the necessary increase in the social protection spending when it comes to the most vulnerable population, the minister said it would be by 50 percent and amount to EUR 60 million, and that "the reform of the public administration would follow."

The pension system reform would also continue, "along with a further indexing of pensions in 2015 and 2016 of 0.5 percent, twice a year."

Krstić said the government planned to, by 2020, move the retirement age for men and women closer, so that women would retire at 63, and men when they are 65 years old.

The budget deficit is now 4.7 percent, while IMF estimates range up to eight percent, he revealed. At the same time the public debt ranges from 58 to 60 percent, Krstić warned.

"Without these measures, we would go bankrupt in the next two years," said Krstić.

The minister also announced another revision of the state budget for 2013, "because revenues will be reduced by 20 billion" compared to the planned figure.