Institute for International Relations

Expert Seminar Report

Zagreb, Croatia, 9 December 2008, 9:00 a.m. – 12:30 p.m.

On Tuesday the 9th of December 2008 in the Hotel Dubrovnik in Zagreb the Institute for International Relations and the Bertelsmann Foundation based in Germany organized an expert seminar “Croatia in Transformation: Political Management – achievements and challenges“. The meting was part of a series of such events organized in seven Southeast European countries during the last quarter of 2008. The initiative is to be concluded with a regional conference in cooperation with the Regional Cooperation Council (RCC) in 2009. The expert seminar has been opened by the welcoming speeches submitted by Mr. Sönke Lorenz, Deputy Head of Mission and Counsellor-Chargé d' affairs a.i. of the Embassy of the Federal Republic of Germany in the Republic of Croatia, Mr. Mladen Staničić, PhD, Director of the Institute for International Relations and Mr. Armando Garcia Schmidt in front of the Bertelsmann Foundation.

The first part of the expert seminar moderated by Prof. Franz-Lothar Altman from the University of Bucharest focused on the Transformation Index of the Bertelsmann Foundation (BTI) for 2008 explaining its philosophy, methods and findings. The first presentation has been submitted by Sabine Donner, PhD, from the Bertelsmann Foundation who focused on the philosophy of the BTI and on explaining the mechanisms of transformation assessments. Ms Donner stressed that the first BTI has been published in 2003 and that index takes the political, economic and management dimensions into account. The basic ideas behind the index are that the process of transformation can be measured, that the governance capability is the key to successful transformation and that the politics of change is possible.

Reflecting upon the political transformation Ms Donner explained that the BTI builds upon a broad concept of democracy which doesn't only focus on the free and fair elections but also concentrates on a wider net for civil and political rights and asks about the extent to which the political society exists. In the area of economic transformation the BTI evaluates all the usual indicators of economic performance but also asks such things as the level of socioeconomic development, data on private property and sustainability. Regarding the political management transformation the index reflects the existence of the good governance practices. The composition of the BTI is a very sophisticated review process involving two evaluators on the national level coordinated by the regional coordinator who reduces the level of subjectivity which is inevitably always present. The main efforts are targeted towards conversion of text notions into scores which are fully accessible and transparent. The BTI allows the comparison of countries via the diagram which in a most visual way shows weaknesses and strengths of a particular country. The presentation led to the conclusion that the BTI is a fairly new index which is less strict than the other older indexes and that it would be desirable to see more complementarities between various indexes.

The second presentation focusing on the findings of the 2008 BTI report for Croatia has been submitted by Mr. Siniša Kusić, PhD, from the University of Frankfurt, who stressed the importance of judiciary reform and underlined that corruption continuous to be a serious problem. Regarding economic transformation (scored 8.29) the report notes that Croatia is a high income country in the Southeast Europe, although it itself suffers from the high regional disparities. Croatia was successful in keeping the inflation levels low, while in the last years privatization speeded up resulting in 2/3 of Croatian firms now being privatized. Commenting on the high level of unemployment (12,9%) Mr. Kusić stressed that although higher then the EU average it is about the same as the level of unemployment in Spain. Reflecting upon the management index (scored 6.87) Mr. Kusić said that Croatian society is still struggling with authoritarian legacy which results in citizens not trusting the state institutions. Among some of the most important challenges the report mentioned reform of the state subsidies system and the question of increasing competitiveness of Croatian firms.

Speaking as a commentator in the first part of the seminar Ms. Višnja Samardžija, PhD from the Institute for International Relations stressed that due to their comparability with other scores, the BTI are very useful and represent enormous potential for analytical work. She commented that the BTI is still not very much in use in Croatia and pointed that it is important to pay more attention to the target group of users. Ms. Samardžija reflected upon the fact that Croatia is in the final stage of its accession negotiations with the EU which in itself presents an incentive for reforms in all fields. Therefore the interest of Croatian business community, politicians and academics is very much focused on some particular issues of transformation. As an illustration, she mentioned some examples of positioning of Croatia within several other indexes (Transparency International corruption perception index, EBRD transition indicators, WEF global competitiveness index, etc). Answering the question about the users of the BTI index Ms. Donner explained that BTI is widely used by the development organizations and that it is used by various countries in governance assessments. Ambassador Michael Schmunk added that the BTI is very useful in ranking the failing states. Namely, that it helps in setting the list of priority countries and priority fields of action.

Ms. Martina Dalić, MSc. President of the Management Board of the Partner Bank Zagreb opened the second part of the expert seminar. Her presentation focused on the world financial and economic crises and the question how Croatia will deal with it. She stressed the importance of finding the balance between adopting necessary measures as a response to the crisis and obtaining consensus on implementation of such measures by the general public. The latest years she described as a good period in which the economic cycle was growing. Now, with the world crisis Croatia is faced with the need to implement unpopular measures without having many options while the 2009 will be the year when large amount of Croatian debt will need to be paid. The crisis will certainly have serious implications on Croatia because tourism with its direct and indirect impacts is expected to decline, as is the Croatian export which is 70% targeted towards the EU market. The general course of negotiations on EU membership is slower then originally expected but it is important to conclude it before the start of negotiations on the next EU financial perspective.

Prof. Ivan Grdešić from the Faculty of Political Science in Zagreb focused his presentation on the issue of Croatian political transformation which in the latest BTI report has been scored 8.85. Reflecting upon the Word Bank Government index Prof. Grdešić stated that it includes six factors out of which for Croatia four recently show signs of stagnation. This in his opinion shows that Croatia has reached a threshold in reform capacity and that in making further reforms little can be accomplished by the political will. Now, the change has to come from the people and not from the elites, and that can be accomplished through education, leadership and last but not least patience. Commenting on the ongoing accession process Prof. Grdešić stated that it has become clear that the EU is not the universal answer for solving Croatian problems. The current financial and economic crisis demonstrated that the EU has no collective response to its challenges but instead that every member state alone tries to find ways of dealing with the impacts of this crisis. In concluding his presentation Prof. Grdešić singled out agriculture, environment and judiciary as areas where in current negotiations with the EU Croatia faces largest challenges. In agriculture for the government it will be difficult to close negotiations within the ruling coalition. In environment the challenge comes form the huge financial requirements in adopting the acquis which will become increasingly difficult in circumstances of the world economic crisis. Finally, in judiciary Croatia is confronted with making deep rooted changes which cannot be done in a short time period.

The debate which followed the official part of the seminar reviled number of important issues. Mr Martin Lessenski from the Bertelsmann Foundation underlined the need for making the accession process more participatory in nature which would produce space for creating public consensus on the measures which need to be implemented. Mr. Mladen Staničić, director of IMO, expressed its reserves about the existence of the BTI status index which combines the scores of political and economic BTI indexes, noting that it blurs the fact that in terms of market economy there are some very advanced countries which are not democracies. Commenting on the BTI scores for Croatia, Ms. Suzana Jašić, head of the Croatian non governmental organization GONG, stated that the scores are too high because of the general intention in the country is of making the data look better then they are. She was very critical about the fact that most of the new laws in Croatian Parliament are passed within the emergency procedure which means that there is no meaningful deliberation about the content of these laws. Furthermore, she pointed to the lack of transparency in political campaigns and in overall governance process. The lack of transparency is also visible in the fact that Croatian negotiation positions with the EU are not accessible, and neither is the content of the closed chapters.

Mr. Tin Gazivoda, head of the Human Rights Centre in Zagreb, commented on the statement about the lack of transparency by saying that even the EU negotiation positions are not enough transparent. He stated that the Croatian Parliament should have more oversees power towards the government. In his opinion the mark of the Croatian status index for 2008 (8.57) is too high as it doesn't reflect worsening of the security situation in the country. Ms. Henriette Riegler, PhD, from the Austrian Institute for International Affairs, stated that in her view the crucial aspect in measuring political transformation should be the rule of law, since the strength and power of the parliament is something that even old and established democracies struggle with. Mr. Krešimir Jurlin, PhD, from the IMO commented on certain discrepancies between the BTI scores for Croatia and the way that Croatian business community views certain issues. These discrepancies occur in the areas of antimonopoly, the general quality of education and R&D and the quality of R&D in businesses themselves, where the BTI scores are too high.

The findings of the expert seminar have been briefly summed by Ms. Petra Bläss-Rafajlovski, PhD, Senior Consultant from Berlin, who stated that more effort should be put into making connections between the BTI index and the various other indexes, and that the role of civil society in creating an adequate picture of transformation should be strengthened. Furthermore, it has been concluded that Croatia is faced with the difficult task of completing its EU negotiation process in unpredictable and demanding period of the world financial and economic crises.

Hrvoje Butković