Balkan Business Reforms

15 september 2005

News – Doing Business in 2006 – Reforms Mean More Jobs

It’s a wonderful late summer in Zagreb in Croatia where I am at the moment. After a discussion in Brussels yesterday on the politics of Southeastern Europe in the context of the enlargement strategy of the European Union, I’m now here for discussions on the business and investment possibilities of the region.

And they are certainly there. All the countries have made rather remarkable progress in the last few years. That Croatia is on the verge of starting accession negotiations with the EU is a clear sign of this.

Earlier this week the World Bank published its annual survey of reforms in business conditions around the world.

During the last few years it has consistently been Central European countries that have been on the top of that list. Reforms driven bby European integration has been rated by the World Bank as the most significant in the global economy.

This year it is Serbia and Montenegro that suddenly emerges at the top of the list of global reformers when it comes to business conditions.

”Five of the top reformers were from Eastern Europe led by Serbia and Montenegro. So from setting up a business, through dealing better with construction licenses, improving property registration, hiring new workers, to paying taxes, contract enforcement and bankruptcy and access to credit – Serbia and Montenegro covered the waterfront.”

So things are distinctly moving in this part of Europe as well, although this does not mean that everything is perfect – there is still much to do.

But it shows how the agenda here has shifted from the conflicts over the past to reforms for the future.

Fewer or More Subsidized Jobs?

13 september 2005

Regeringsf�rklaringen 13 september 2005

I have just attended the ceremonies in connection with the official opening of the parliament in Sweden, and listened to the policy statement for the coming year by the Prime Minister.

It was a somewhat odd event, since obviously the governing Social Democrats had failed to reach full agreement with their parliamentary base in the Left Party and the Green Party, which is highly unusual.

Election is approaching in a years time, and the Prime Minister put great stress on increasing employment in the economy. The unemployment situation is generally seen as the biggest of the failures of the present government. It is, of course, much higher than what is reflected in the official figures.

The PM read a long list of thousands of new jobs that will be created with an avalanche of different schemes of old and new subsidies.

I have to confess that I would have felt better if the Prime Minister had been able to say that we are now drastically cutting back on all the different schemes for subsidized jobs, since real jobs are now created by real growth in the real economy.

The large expansion of all these subsidized jobs is really a sign of failure.

A good economy requires fewer – not more – subsidized jobs.

Took Some Time…

13 september 2005 / World / Europe – Albania PM wins confidence vote

It took some time for Albania to get its new government after the July 3 elections, but it now is finally in place.

All in all, it was a peaceful and orderly transfer of power. As such, it was the first in recent Albanian history.


Oil-for-Food Facts

13 september 2005

Oil-for-food: Far from a failure – Editorials & Commentary – International Herald Tribune

Having spent some time flying across the Atlantic reading the Volcker Report on the Oil-for-Food program and the alleged scandals around it, as well as discussing it with some of the key UN people in New York, I can not but recommend reading the linked article from today’s IHT.

The Volcker Report notes – although this has been largely ignored by the media – that the money that the Saddam regime got to an overwhelming degree was the result of smuggling beyond the UN programme, and that this smuggling was known to and in major cases even sanctioned by the US and UK, which were the key members of the 661 Committee of the Security Council.

You can not avoid the conclusion that what the massive Volcker Report investigation has found does not amount to much. In one case, Mr Savan clearly violated UN ethics rule, bu whether anything illegal was done remains to be clarified.

It is worth nothing, that the Volcker Report fails to mention the very large amount of Oil-for-Food money that was transferred to the Coalition Provisional Authority in Iraq and for which there has been no accounting whatsover.

New Scene in Norway

13 september 2005

Aftenposten Norway, Norwegian news in English

As expected, the election in Norway yesterday resulted in a shift of majorities in the Storting, and within the next few weeks the centre-right government under Kjell Magne Bondevik will be replaced by a redgreen coalition under Jens Stoltenberg.

Stoltenberg was the undisputed winner of the election, taking his party from its disastrous 2001 result of 24,3 % to no less than 32,7 %. He has now committed himself to a coalition government with the leftist-populist party SV and the agrarian nationalist Senterpartiet.

It will – as I have written about her earlier – be a most uneasy coalition. There are fundamental differences of opinion, not the least on foreign affairs, between the parties.

On the non-socialist side the result was heavily influenced by the fact that a large part of the electorate thought that PM Bondevik should leave. This was expressed very openly by the populist Framstegspartiet, and was undoubtedly one of the reasons for its success, replacing centre-right Höyre as the second biggest party.

Höyre for its part was squeezed between its support for Bondevik and the fact that on this issue many of its voters had sympathy for what Framstegspartiet had to say. It’s party leader Erna Solberg accordingly had difficulty getting her profile through during the campaign.

Now we will have to await the forming of the new government and its policy declaration. There will certainly be reason to return to the subject when that is presented.

United Nations News Service

12 september 2005

United Nations News Service

It’s a sunny and nice morning in New York, and leaders are starting to gather for the 60th General Assembly of the United Nations. The local TV stations are warning that security precautions will close off large parts of the Eastern section of middle Manhattan.

Over the weekend, talks have been continued in a smaller group to sere if it is possible to reach agreement on a document for the summit starting on Wednesday. Lead by the incumbent President of the General Assembly Mr Ping, the process produces different drafts all in the Ping name.

Later today a new draft might be presented to the member countries, possible with the Secretary-General himself making an appeal for it to be adopted as the basis.

But the reform process is now down to rather few issues. With the question of an enlargement of the Security Council effectively off the table, the minimum requirement seems to be an agreement on the new Human Rights Council proposed as well as the beginning of progress on the different managment issues.

Not much, but at the least something.

On the last point, it’s primarily a question of starting to get rid of the myriad bizarre and sometimes even stupid regulations that the General Assembly has decided during the decades, and which tends to make effective managment by the Secretariat nearly impossible.

But, as one could expect, this is encountering fierce opposition from not the least the developing countries. Often these regulations have been driven by them. They fear that a stronger Secretariat will de facto mean a stronger role for the Americans and others.

It will be an important meeting, but I fear we should not expect too much in terms of important results. At the moment, avoiding a break-down is the number one priority.

But when the summit itself starts Wednesday, I would be surprised if there is not some sort of basic text already agreed. Everyone will have to give a little.

That’s the only way in which the United Nations can work.

Reform Victory in Japan

12 september 2005

The Japan Times Online

Prime Minister Junichiro Koizumi was the big winner in the elections to the Lower House of the Diet of Japan on Sunday.

At the time of writing, his LDP had won 280 of the 480 seats. That’s a big increase from the 212 seats it had previously.

But even more important is that the back has probably been broken on all those that have opposed and delayed the necessary reforms that Prime Minister Koizumi has been pressing for. The LDP might have turned into more of a reform party than was the case before.

‘Prospects for the Japanese economy were already improving. With this election result, they are certainly not going to get worse.

Rather the other way around.

A different America?

11 september 2005

No Fixed Address – New York Times

Four years after September 11, the United States is struggled with another major blow against its self-confidence. But in much the same way as we saw then, great forces are being mobilized in order to create a new beginning.

New York is back in a big way since that dreadful day four years ago. The gaping hole down near the southern edge of Manhattan is still there, but in every other sense the city is truly booming, carried forward not the least by the strength of the US economy and its pivotal position in the global economy.

On a sunny and warm day like today, all the world seems to be strolling through the streets of mid-Manhattan.

The New Orleans catastrophy will take a long time to repair. But in the media here, discussions have already descended into a very partisan dispute over who is to blame for most things. It is Democrats versus Republicans in a show of politics at its worst.

Large sums are already talked about when it comes to the rebuilding efforts. It will be sums probably larger than the annual costs for the Iraq war, with the total talked about perhaps in the order of 150 to 200 billion dollars. Huge amounts.

There will be a new but probably different New Orleans. And there will in all probability be an attempt to address the race and poverty issues that obviously predate even the Bush administration, but where so brutally exposed in the aftermath of the hurricane.

We are told that America will never be the same. Sure. America is never the same. September 11 changed a lot. So, in its own days, did certainly the San Fransisco earthquake. Not to speak about World War II or the Vietnam war. This is a society where change is the only thing that’s permanent.

Back in Europe there are those gloating and hinting that higher taxes would have held off the hurricane or at least substantially alleviated its effects.

It sounds improbable, sorry to say. A hurricane of that order tended to devastate cities irrespectively of the level of income taxes – if they are not used to permanently hiding the population in bunkers.

But the New Orleans tragedy has clearly changed the agenda of the Bush administration. By how much remains to be seen. These are still early days.

But with his leadership abilities on the issue called in question, and with Iraq looking constantly messy, there is bound to be rather intense strategy sessions in the White House.

America will change. Sure. But in changing I guess it will still have a tendency to look the same.

Over Greenland

11 september 2005

Just coming in over the East coast of Greenland on a spectacular sunny day.

The majestic glaciers seem to softly be discharging their icebergs into the crystal clear fjords. There are no signs of human life or activity whatsoever down there. In spite of the beauty, conditions for life are harsh.

The contrast between the comfort of the aircraft cabin with its Internet connectivity many thousands of meters up in the athmosphere is striking.

I think I have written it before, but the Greenland coasts on a clear day from high above is one of the most breathtaking sights on Earth.

Tight Race in Norway

11 september 2005

R�dgr�nn opphenting –

The very last opinion polls before the parliamentary election in Norway tomorrow shows that it will be a very tight race.

The redgreen opposition coalition has been leading during most of the campaign, but during the last week a number of opinion polls suddenly showed the race tightening and the combined centre-right even taking a small lead.

But now the last opinion polls shows the redgreens winning, although with a very narrow margin. AP leader Jens Stoltenberg obviously performed well in the final TV debate between all the party leaders Friday evening.

But tomorrow will decide.

Confrontation in Kiev

10 september 2005

Kiev Ukraine News Blog

In an emotional TV interview, Ukraine’s former Prime Minister Yulia Timkoshenko has gone into confrontation with the team and policies of President Yushenko.

That’s the end of the Orange Revolution coalition for the time being. Although those that want to write off the entire Orange Revolution are hardly in touch with reality.

Yulia Timoshenko has proven herself as an able infighter and an accomplished populist. In addition, she’s a personality with charm and charisma, and the ability to transform that into power.

But she was a revanchist upset with the past much more than a reformer looking to the future. It’s a pity – but a regrettable fact.

Now there will be drama on the political stage from Donets to Lvov.

Danish Model in France

10 september 2005

Statsministeriet – Statsminister Anders Fogh Rasmussens tale ved UMP-konferencen om �konomiske udfordringer den 7. september 2005 i Paris (Talen er p�engelsk)

Swedes have a tendency to believe that most of the world believe in some sort of ”Swedish model” for the development of society.

But those days are mostly gone. Although the Swedish economy is performing well, there are other models that are attracting the attention of Europe.

Apart from the Finnish model, highlighted in numerous studies on growth and competitiveness, there is also the Danish model.

On September 7th, the UMP party of France under the chairmanship of strong presidential candidate Nicolas Sarkozy organized a major conference in Paris on how to reform the French and the European economy.

The keynote speaker at the conference was Denmark’s Prime Minister Anders Fogh Rasmussen.

He outlined the foundation for Denmark’s strong performance in the policies initiated by the centre-right government in 1982, and pointed in particular at the flexibility of the labour market in Denmark.

Indeed, the word ”flexiturity” – combining flexibility in the markets with social security – has become an increasingly popular concept recently in the European debates on structural reforms.

But Fogh Rasmussen also described the forward-looking way in which his government is trying to get Denmark to buse all the possibilities created by globalisation.

Reaping the full benefits of a creative, positive strategy towards globalisation requires two things: Firstly, we must carry out the necessary reforms to prepare our societies for the challenges of the future and, secondly, we must work to liberalise trade through free and open markets.”

One can only hope that these words from Copenhagen was sufficiently heard in Paris.

But the bare fact that it was Anders Fogh Rasmussen who was invited to give the keynote speech at the conference is a distinctly positive sign.

Disarray by the Dnjepr

09 september 2005

TAK! :: People’s Union Our Ukraine :: Official party site

To some extent, the political crisis that we now see playing out in the Ukraine was expected.

In Moscow, were I was when the news broke, surprise was distinctly limited, although my talking partners in the Kremlin noted how fast things had developed just during the last few days.

Following the Orange Revolution, President Yushenko set together an administration where he tried to be nice to virtually all the different parts of the original coalition of the revolution. Given the circumstances, he probably did not have much of a choice.

But the contradictions were obvious from the very start. When I was there in the spring and met, among others, Prime Minister Tymoshenko and Security Council head Poroshenko it was fairly obvios that they were singing to different tunes. Already then, the air was rife with rumors about a coming rift.

Since then, things went first worse, as Yulia Tumoshenko messed up economic policy, and then somewhat better as President Yushenko tried to restore some order. But it was evidently not enough.

Much boils down to the issue of reprivatisation. There is no doubt that some of the privatisations carried out by the Kuchma regime were designed to enrich their its loyal cronies. But to tear up everything in 3 000 or so cases, as Tymoshenko wanted, and redo the entire thing was bound to create chaos for years to come. Everyone would suffer.

When the process of reprivatisation – much more limited in scope – finally started, it looks as if there was a tendency to take things away from one set of people and give these things to another one. Allegations of corruption and cronyism were all over the place.

And at the end the President probably had few options left but to ask the two protagonist in the internal civil war in the regime to leave. It was a decisive and probably unavoidable move.

Now, much depends on what Yulia Timoshenko will. She is undoubtedly charismatic, and has a willpower that should not be underestimated.

The fear is that she will link up with the strong industrial groups in Eastern Ukraine to form a new opposition bloc for the March 2009 parliamentary election. Then she could sweep back to power at a time when constitutional changes have made the position of the Prime Minister much stronger.

But for the time being the changes brings the hope of a more coherent and clear reform course in the policies of the country. The designated new Prime Minister is said to be less interventionist and more committed to the reform course. Revenge does not seem to be his main driving force in politics.

Let’s hope that will be the case. A new government is yet to be formed, and Yulia Tumoshenko hasn’t really declared what she intends to do.

One should note that time is running very fast, and that action now is necessary in order to avert worse problems further ahead.

By the beginning of December, the European Union is scheduled to assess developments in Ukraine and the prospect for accelerating the integration of Ukraine in its different structures. A positive signal from that assessment is important for the Yushenko team as it approaches the March elections, but such a positive assessment will depent on policies announced and implemented in Ukraine during the the coming weeks.

Relations with Russia are also challenging. Most important here is to sort out the issue of the price for the natural gas that Ukraine is importing from Russia, and which it still gets at prices well below what the EU countries are paying. But now Gazprom wants to rise the price in that direction, and if this happens during the coming winter there is bound to be an adverse impact of the economy and perhaps the living standards of ordinary people.

So there are challenges both concerning the European Union and Russia in the weeks and months aheas. To maneauver both of these relationships prior to the March elections will require both skill and determination from the political leadership in Kiev.

Much need to be put in place now. Time is short. Next week President Yushenko is off to New York to the UN Summit there.

Future of United Nations and Kofi Annan

07 september 2005

No single nation can match UN; credibility must be restored, says Volcker

The publication earlier today of the final report of the Volcker independent inquiry in the running of the so-called Oil-for-Food program set up by the UN Security Council has undoubtedly thrown the organisation into a crisis just before its scheduled summit meeting.

I have not yet had the time to read the report in full, but will certainly do so in the next few days.

Paul Volcker rightly notes, that the program was ”a compact with the devil, and the devil had means for manipulating the programme to his ends.”

In a sense, the entire program played into the hands of Saddam Hussein and his regime, and that in more ways than I believe is covered by the Volcker report.

No one who has worked in the UN system will deny that a major overhaul of its managment system would be more than welcome. In many ways it is a tragedy that this could not be done during the otherwise succesful years of Kofi Annan, given not the least the fact that he personally knew every corner of the organisation better than most.

But it’s much too simple to just point at the Secretary-General or some other individuals. The powers of the Secretariat are often severly restricted by the political authority of the Security Council and the budgetary authority of the General Assembly. This was to a degree beyond the normal the case in the Oil-for-Food program.

Now, we’ll have to see what effect the Volcker report has. Clearly, it will focus the attention of the upcoming General Assembly and the summit meeting on the needed managment reforms. But there will be severe opposition against these important issues crowding out other important issues, not the least those concerning the Millennium Development Goals.

And over the discussions will of course be hanging the question of the future of Kofi Annan. Can he stay his term out, with a successor elected a year from now, or will there be calls for a speedier transition to a new leadership of the organisation?

The question will be hanging there. It is certainly unfair to the legacy of one of the most succesful Secretary-Generals in the history of the organisation.

But it’s nevertheless a reality after the report today.

Norwegian Echo

06 september 2005

Sammenligner Stoltenberg med Putin –

Those able to read Norwegian might look at what the leading Oslo daily had to report on what I have written on this blog on the economic policies advocated by the prospective redgreen governing bloc in Norway.

Meanewhile, opinion polls continue to indicate that such a government is the most likely – although not entirely certain – outcome of the September 12 election.

Evening of Debate – Germany

04 september 2005 – Schr�der gewinnt TV-Duell – Merkel besser als erwartet

Obviously, the German debate was of somewhat greater importance than the Swedish one with the election as imminent as it is.

It was also expected that perhaps 70 % of the German electorate would watch this the only direct encounter between Gerhard Schröder and Angela Merkel during the campaign.

It is doubtful whether the debate will change much. There were – as far as I could see – no major policy surprises, mistakes or blunders.

In contrast to the very domestic-oriented Swedish debate, Europe and the world did figure in the German one. Schröder did a statesman-like explanation of the geostrategic importance of integrating Turkey with the rest of the European Union, which made Merkels resistance on this issue look rather pedestrian.

As expected, Schröder turned out to be the more skilled and confident debater, but at the same time the opinion polls indicated that Merkel performed somewhat better than people had been expected.

An important waypoint towards a new government in Germany has been passed.

Evening of Debate – Sweden

04 september 2005 – Nyheterna

This was truly the evening of the great and important political TV debates.

I had some difficulties following both the big debate between all the party leaders in Sweden a year before our election and the important debate between Gerhard Schröder and Angela Merkel two weeks before the German election.

But modern technologies makes most things possible these days.

There was no doubt as to the outcome of the debate in Swedish TV.

In an opinion poll immediately afterwards, the Moderate Party leader Fredrik Reinfeldt come out well ahead of Prime Minister Göran Persson. When asked which of the two government alternatives – the present redgreen constellation or the new alliance between the four centre-right parties – they preferred 54 % said that the alliance inspired more confidence versus only 31 % for the redgreen constellation.

A very clear result.

And a fair one. The Prime Minister’s high-profile attempt at assualting the alliance for cutbacks in the unemployment insurance system didn’t really work, and when thius his piece de resistance didn’t, nothing else did either.

Instead, he suddenly found himself having to defend his proposal to increase subsidies to higher income earners – while the alliance want to lower taxes for those with lower incomes.

Lower taxes for people with lower income suddenly stood against higher benefits for people with higher incomes.

In his initial attempt at assualt – before it all failed – it was also noticeable that the Prime Minister tried to ride a wave of anti-Americanism. Time after time, he accused the alliance of wanting an ”American model” that was grossly unfair, in contrast to some sort of ”Swedish model”.

But it didn’t really work either.

It’s a year to the election, but so far the government seems to getting most things wrong, and the normally savy tactician Göran Persson seems to create the one problem after the other for himself.

There is no question what would be the result of an election in Sweden in the next few weeks.

A year is a long time in politics. Much will undoubtedly happen. But there is no doubt that the entire scenery has changed in a fairly fundamental way.

Caucasus-wide conflict?

04 september 2005

Turkish Daily News – Unrest threatens to engulf Russia

There is no denying that the security situation in Russian-run Northern Caucasus is deterioating.

Dagestan has been in particular focus lately. Even President Putin felt compelled to pay a brief visit to the security forces there just before the summer. The ethnic diversity of Dagestan, and the strong Islamist undercurrents obviously to be found in some groups, make it a particuilarly demanding place.

The roots of the insecurity goes deep, as the linked article tries to explain. And the present policies of repression rather seems to make things worse.

According to a security source interviewed for the article, ”there is a 90-percent chance of a Caucasus-wide conflict.”

Such a conflict will affect all of Russia – and indirectly us as well.

Fatal Flaw in Constitution?

03 september 2005

The Iraqi Constitution: Potentially Fatal Flaw

There is, as I have written earlier here, reasons to be concerned over the draft for a new Constitution for Iraq.

It might contain the seeds not only for immediate conflict in terms of Sunni anger, but also future conflicts in terms of the power over oil.

For the foreseeable future, oil is everything that Iraq has. Oil exports are 98 % of the country’s export, and with foreign assistance of different sorts declining in the future the country’s oil dependence is massive.

Iraq has vast reserves. Within OPEC, they are second only to Saudi Arabia. Since large areas of the country haven’t been properly explored for decades, it is by no means excluded that further large finds will be made.

Power over oil is the power over the economy that will bring power over Iraq.

That’s why it is so disturbing that the draft constitutions provisions concerning oil revenues are so unclear. In all probability, they will be used by the Kurds in the North and the Shiia in the South to argue that any income from new oil wells should go to them rather than through the central government.

There is no doubt that such a reading of the constitution will further a disintegration of the country. There will be very strong incentives for the Kurds and the Shiites to attract oil companies to their part of Iraq to drill new wells, in all probability also so adjacent to old fields that only the distinction between new and old is bound to create conflicts.

On present plans, there will be a referendum on the constitution on October 15th.

Let’s hope that the unclear and dangereous parts of the draft constitution can be sorted out before then.


03 september 2005 T-P Orleans Parish Breaking News Weblog

The devastation that hurricane Katrina brought to the US Gulf coast – with the city of New Orleans ”the epicenter of chaos and misery” – seems to defy belief. There is talk of thousands of people having lost their lifes.

It is nearly unavoidable that relief efforts are seen as inadequate in a situation like this. Perfect relief operation have yet to be invented by mankind.

But even while taking this into account it is difficult to avoid the impression that the Number One Superpower has been caught in a situation that exposes some of its vulnerabilities and shortcomings in a very brutal way.

There is likely to be an acrimonious debate as things start to settle down and focus shifts from the immediate needs to the larger questions of what could have been done to prevent this massive damage.

In the meantime, the local media gives the world a window towards how that debate is shaping up.