bruno s. sergi — university of messina 1 st meeting of nis trade union economic experts tbilisi,...

Bruno S. Sergi — University of Messina

1st Meeting of NIS Trade Union economic expertsTbilisi, 23-24 May 2011

SEE TU economists’ Network and the prospects for similar initiative in the NIS region

Bruno S. Sergi

University of Messina & ETUI

The Experience in South East Europe

PERC’s regional office is located in Sarajevo

Network’s members: TU representatives from former Yugoslavian countries + Albania (i.e., roughly 18 TU members + PERC’s executive secretary + coordinator in Sarajevo + myself)

The TU economic experts’ network gathered for the first time in Belgrade on 12-13 November 2009

Two more meetings followed in Sarajevo (7-9 April 2010) and Kotor (9-10 December 2010)

More meetings are on the pipeline: 2011 and 2012


What the SEE TU network is about?

The network draws together economic experts from national trade unions to work on the relationship between the state, trade unions, businesspersons and labour markets under new market economy rules and prospects


Effectiveness of trade unionism

That is, the network’s agenda looks upon the effectiveness of trade unionism in the Balkan region, towards a clear understanding of the many challenges and opportunities that these national economies face today. In the light of market economy’s economic crises, placing emphasis upon its explanations and its nature as well as upon the multirole of the state and other economic actors is vital


Our agendaWe strive for an array of activities, from enhancing

national labour activists and economists’ professionalism to awareness of rules of law, reinforcing our knowledge about the key conditions for economic and technological growth

In the light of changing national/international business environments, we need to: change our ways of thinking, be attentive concerning shaking-off previous inertia, develop fair and creative strategies take advantage of the opportunities that national and international

markets offer


During the first meeting were discussed

The effects and after-effects of global economic crisis in the SEE

The role of IMF and national governments’ measures

How to protect jobs, prompt decent work and fundamental workers’ standards

The role for trade unions in implementing coherent and sustainable pension reforms

Migration policy


…….. an additional aspect

In addition to this, I put forward the study of global financial and economic crisis, the role of international financial institutions whose professional economists and money spent on economic analysis could not suffice even to foresee the recent crisis nor how to circumvent this crisis’ deep economic after-effects


Ongoing debates

Trade union leaders and economic representatives painted a thorny economic situation in SEE and that these countries were experiencing a “domestic crisis” even before the recent economic crisis has been officially recognised worldwide

Although an ongoing economic recovery, the overall situation is intricate now


A first list of priorities

The Belgrade meeting helped us to come up with a first proposal of priority issues and identify vital problems and obstacles in SEE:

untenable poverty inefficient and ineffective public administration high level of corruption high level of criminality


Labour markets

taking into consideration newly established social and economic circumstances and the fact that the market nature of labour relations might cause further restrictions on workers’ rights

this requires a better balance between the flexibility and social security as well as a more resolute fight against corruption


Also about Stability and Development in SEE

Stability and development rest on a variety of issues in SEE:

expenditures policies tax policy strategies investments on material and immaterial

infrastructures (i.e. what we can term as “intangible capital”, such as human capital, skills and know-out, social capital, generalized trust among citizens, the economy’s institutional framework)


Intangible capital and a country’s wealth

One evidence: 78% of the world’s wealth is due to intangible capital, with a range from 59% in developing nations to 80% in OECD high-income countries, the World Bank posits

Felix Roth and Anna-Elisabeth Thum (2010) found a positive linkage between intangible capital investment and business and labour productivity growth over the period 1995-2005


The following proposals were discussed in Sarajevo and Kotor

the possibility to activate a regional agency for the fight against corruption (NB: the Kotor meeting was held on the International Anti-Corruption Day, i.e. 10th December !)

to establish a regional agency for research in the field of labour rights and labour market flexibility

to have a network’s Internet Forum to make the network noticeable inside and outside the region and a platform for debate

to appointment of a public relations officer who should be in contact with the media to inform the public about the network’s activities

to set up working groups in charge of writing reports on the problems of unemployment, migration policy, corruption, harmonisation of tax regulations, poverty/income inequalities


...... although some free market economists

For some free market economists, such as Friedrich Hayek and Ludwig von Mises, economic progress and income inequality are linked to growth and free markets:

Friedrich Hayek claims that progress does not take place in uniform ways

Ludwig von Mises states that income inequality is inherent to market economies, therefore, eliminating inequality would mean eliminating the market


World Banks is advocating further deregulation of labour markets

World Bank’s Doing Business 2011 (the eighth in a series of World Bank’s reports investigating the business activities across 183 economies and over time) advocates a deep deregulation of labour markets and the elimination of minimum wages, among others

The WB has been in the wrong at the beginning of the transition process in late 1980s/1990s and seems to be wrong these days too


Other debated issue: Corruption/Crime and the impact on business

The post-socialist transition process has been accompanied by widespread allegations of corruption and economic crime

How far do corruption and crime impede economic development?

What are companies doing to resist corruption?

What should they do?



Control Risks’ report - 2009

This report is based on a survey of senior executives from 244 international companies operating in three countries in Central Europe: Czech Republic (40), Hungary (43) and Poland (40) and three in SEE: Bulgaria (39), Romania (42) and Serbia (40). The survey was carried out in 2007.

With regard to size, 115 respondents were from companies with fewer than 250 employees in the country concerned; 68 represented companies with between 251 and 750 employees; and 63 were from companies with more than 750 employees.


The scale of the problem→ When asked an open question about the most critical risks for

business, most respondents mentioned mainstream commercial issues, e.g.:

- competition (18%- fiscal and economic policy (13%)- market-related risks (8%)- some 13% of respondents mentioned legal issues- perhaps surprisingly, only 3% cited crime, and none brought up corruption spontaneously!

→ A different picture emerged when they were asked whether corruption was relevant to their business: 18.8% said that corruption was ‘very relevant’ or ‘highly relevant’, representing scores of four and five on a five-point scale. The most striking feature of the responses was the sharp divide between the companies in SEE and their Central European counterparts


Key findings of Control Risks’ Report

Three factors help to explain the apparent disparity between perceptions and concrete knowledge:

Media and academic attention has focused more on public-sector

corruption than on private-sector bribery. People tend to give higher estimates of public-sector corruption because they are more sensitised to the issue, even if it is outside their direct experience.

Many of the respondents are – by the nature of the industries in which

they work – less exposed to public-sector corruption. For example, only 12.5% of retail respondents report direct knowledge of corruption in public-sector contracts occurring ‘often’ or ‘always’, compared with 21.2% of respondents from the construction sector.

Some respondents may have been reluctant to admit to concrete

knowledge because this could be taken to imply a degree of ‘guilt by association’.


International companies

The risks to international companies are clear. When they operate in transition economies, it’s particularly important to understand the backgrounds and current connections of their business partners. If they fail to do so, they risk reputational damage, and even unwitting involvement in money-laundering scams. In the most extreme cases they may expose themselves to attacks, blackmail or even infiltration by criminal elements


Potential impacts of organized crime on business

Overall, some 40%-50% of the respondents “rather” or ‘definitely’ agreed with the view that organised crime could have a serious impact on international companies. Respondents “rather” or “definitely” agree that organised crime can have serious impact on business. Overall, 36.1% said that local companies “sometimes” had financial links with organised crime, while 7% said that such links existed “often” or “always”.

However, the regional breakdown shows that there were hardly

any Central European respondents who thought that criminal links with local companies were commonplace. By contrast, some 20% of Bulgarian respondents said that local companies “often” or “always” had financial links with organised crime.

Key points stand out in SEE

Bulgaria stands out as the country where respondents were most likely to report first-hand experience of corruption in public-sector contracts, as well as demands for bribes to speed up official government transactions

When asked about their personal knowledge of corruption, many respondents cited incidents involving the public sector. However, almost as many referred to “private to private” corruption, for example when suppliers pay kickbacks to their private-sector clients

Overall, some 40%-50% of respondents “rather” or “definitely” agreed with the view that organised crime could have a serious impact on international companies



Rooms for optimism!

An overwhelming majority of respondents either “definitely agreed”

(47%) or “rather agreed” (38%) with the statement that

it is possible to conduct business successfully without corruption in their

countries of operation

More rooms for optimism

We, the TU economists network, intend to interpret economic and social facts: the recent economic crisis provides unique opportunities to raise great challenges for economists. We will carry on this noble initiative, discuss loudly about all relevant issues and offer suggestions and analyses. Let us be optimistic: the two networks of trade union economic experts could turn up to be success stories as long as we could pursue this line of thought and action throughout the end

Thank you very much and let’s talk!Bruno S. Sergi — University of Messina

bruno s. sergi — university of messina 1 st meeting of nis trade union economic experts tbilisi,...

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