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Vol 3, No 16
7 May 2001
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The Patriarch of Industry
An interview with Svetozar Janevski
Sam Vaknin

Svetozar Janevski is the patriarch of Macedonian industry. The CEO of Macedonia's largest brewery, Pivara Skopje, partner with the likes of Coca-Cola and Heineken and the licensee of McDonald's in Macedonia, he encapsulates both continuity and the changing times. He is also a member of the Business Advisory Council of SECI (Southeast Co-Operative Initiative). Janevski would like to make clear: "This interview is my personal opinion; not in my capacity as CEO and not on behalf of my business partners."

Central Europe Review: Why should multinationals come here?

Svetozar Janevski: The countries of Central Europe offer land, infrastructure, skilled human capital (or manpower that can be easily re-trained) and tax incentives. They are close to their markets (for instance, Germany) but this may have some effect only on the food industry.

In today's high-tech, wired world this does not constitute an advantage anymore. The fact that these were capitalist market economies before the Second World War is more than outweighed by the stifling brand of Socialism, which was exercised there.

Yugoslavia, from the 1960s onwards, was much more market-orientated, especially in consumer goods. Slovenia, Croatia, Macedonia were much more acquainted with market economics than any country in Central Europe. The Yugoslav physical infrastructure—water, electricity and roads—was better than any of its neighbors (like Bulgaria's or Romania's).

Its higher education system was also outstanding. These advantages were not wiped out by ten years of conflict. We need multinationals. Transition requires "off the shelf" management skills, technological knowledge and marketing. But to attract them, we need transparent regulation, less red tape, and tax and other benefits.

And, now that Milošević is gone, Serbia will lead the way?

Not if they continue the tradition of political revanchism. It was Milošević who opened this Pandora's box when he placed political appointees in various industries. Now, there is a backlash. Slovenia avoided a politicized economy, the division of managers to "black and white" camps, and the attendant animosity. Countries like Macedonia and Croatia are losing energy in this inertial process. It must come to a halt. And, then, after five to ten years of enduring the same problems as other countries in transition have, Serbia may emerge as an economic leader.

It is difficult to develop economically without a private sector and a middle-class? Selling state enterprises to their erstwhile managers and employees—"management and employee buyouts"—was that a wise idea?

What other model succeeded? [Privatizing through] vouchers failed in Bulgaria, the Czech Republic and Poland. It depends more on the prevailing mentality than on this or that model. The main obstacle was the management class in these countries. They were terrified. They felt cozy, were not supervised by anyone and secured personal benefits. All this was threatened by potential strategic investors.

People regarded the marketplace as a danger—not a blessing. Management was thinking local while strategic investors always think global. Local managers erroneously believed that foreign ones would replace them. Actually, multinationals always prefer good local talent to expats. It seems that they don't have enough personnel to run around.

Management is only one element. What about the education system?

It totally failed to adopt the market mentality. In the world, education systems get their cues from the price mechanism. Here they are entirely student driven and not market driven. But I am not sure what model would work and whether intervention is the right modus operandi.

And the bureaucracy, the state administration?

This is a leftover from Socialism. The very people who are supposed to apply the reforms often oppose them. Political appointments are short-lived and no politician has sufficient time to implement his concept or vision. Reform in this part of the world is ego-driven, each (politician) to his own, an elitist endeavor, not a joint, communal undertaking. And the young; they mean well but have no life experience.

You mentioned mentality...

We have a negative mentality, legacies of Socialism, when workers sought to blame the managing class for all their country's ills. Workers were more concerned with the "upper-echelons" than with their own work. Now, these people need to believe in something, to have a dream, to strive to change the situation to improve everyone's lot, not only their own.

Some people say that the low salaries are a disincentive. But why the low salaries in state administration and some firms? Because of managerial anarchy and waste. People plunder their own workplaces, no one benefits in the long- run, and everyone is left impoverished.

Management must have a vision to change things and then the ability to implement its vision. The legacy of "equality" is pernicious. When we cut the bloated state administration, we don't bother to check who is needed and who is dead wood. We cut a fixed percentage across the board, the productive and the non-productive alike.

Another example: in Yugoslavia a school was built no farther than 1000 meters from every human settlement. As the population in some settlements has aged, the schools continued to operate, empty! Army barracks are still maintained at a huge cost, with the number of soldiers drastically reduced!

This is waste. What about corruption?

These countries are poor. We are in a state of traumatic shock: we had everything and now we have nothing. The middle-class was economically murdered. Frustration and shortsighted maximization of benefits ensued. Moreover, people occupy elected positions for a short time with ridiculously low pay.

There are no Japanese kamikazes in the Balkans. People want to secure their economic future once out of office. Only development and prospering business will solve this issue, but definitely not in the short-term. The biggest force against corruption is a thriving business community and a viable, secure, middle-class. Today, people shuttle between professions because no occupation in itself is self-supporting. This also will be solved by development and growth, which will inevitably lead to specialization. Laws are not enough; a tradition needs to develop. Give it time.

So, poverty is to blame?

Not only. Poverty makes it difficult to resolve social tensions and to establish a resilient civil society. But we also lack leadership—business (management) and political. So, people resort to ethnic platforms and action creates reaction.

Like in Macedonia now?

Yes. In my view, these are non-issues. Why not change the Preamble to the Constitution to "Macedonia is the country of all its citizens"? We must devote money to education and weed out nationalist and national-romanticist teachers. We must bring in the EU as a mediator. The use of both languages [Macedonian and Albanian—SV] must be wider. In other words, we must replace the ethnic platforms with a joint platform, for the benefit of us all.

We must enhance the rights and enforce the obligations of the local level of government (municipalities). Let them get more of the regionally generated income but be held accountable and be loyal to the state. We must wage war on illiteracy, which is currently eight percent nationally, but much higher among the Albanian population. Often, Albanian parents refuse to send their children to school and Albanian women are denied education by their kin.

The problem is not that of proper legislation. Long-term development is needed to guarantee peaceful co-existence. Unfortunately, Communism was a punitive system, not dialogue-orientated. This radicalized the Kosovar Albanians [who lived under the Yugoslav regime—SV]. They became ultra Marxist-Leninist-Maoist with dreams of a "Greater Albania." In other words, they preferred Enver Hoxha's way to Tito's [Hoxha was the tyrannical and paranoid Maoist leader of Albania and Tito, the relatively more liberal and cosmopolitan leader of Yugoslavia—SV]. The current Albanian leadership is leading its constituency down the wrong path. But improving the lot of the Albanians, is also our national interest [as Macedonians—SV], not only theirs.

Maybe it is a deeper problem grounded in the history of this region and the repression under the Ottoman and, later, Communist, yokes? Maybe the citizen regards the state as its enemy?

There is some truth to it. People here still don't feel that this is their state. It is a way of life. They renege on obligations such as paying taxes. But humans are social animals who always aspire to alter their environment. The next goal is civil society. But this cannot be achieved without joint communal action and non-political venues and modes of communication. Both are sorely lacking.

What do you think about the International Monetary Fund's (IMF's) involvement in this region?

Their main error is to apply the same recipe to all their clients. But not everything should be criticized. They helped us get rid of hyperinflation with the implementation of strict monetary and fiscal policies, for instance. True, growth was badly affected, but this is not only the IMF's doing. The international community is to blame as well. Investment in Southeast Europe (SEE) is totally inadequate. They are waiting for us to complete all the reforms before they plunge in with foreign direct investment (FDI). Moreover, there is no clear EU (or NATO) accession timetable. The Stability Pact is a glass of water applied to a forest fire. Nothing will change if the economy will not change.

The West invested ten times more in Central Europe, which has less of a population. Sure, we had some objective problems here, like Milošević. But
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now it is over, what next? This region can be very rewarding to investors. The West needs a carrot and stick policy (as is the Stability Pact) but geared at the removal of entry barriers, encouragement of cross border trade and investment, and integration of the whole region in a huge free trade area.

Currently, this region is an anomaly: its countries trade more with partners all over the world, than among themselves! So, we need a guiding vision. Money, often stolen by corrupt politicians, is not enough. And as money is invested, it should be prioritized and supervised.

Finally, Kosovo. Any prognosis?

Kosovo is going to be a long-term global problem. During the war (1999), certain groups were armed and supported with the aim of deposing Milošević. These groups were given a license to engage in smuggling and trafficking. To control this mentality now is difficult. Kosovo urgently needs financial and management skills, but because it lacks rules of normal life, no one wants to establish a business there.

The whole image of the local economy is bad and economic decisions are distorted by quick profiteering in crime. The Kosovars have to let go of their regional-nationalism and dream of "Greater Albania." They must be convinced to become a part of the European family of nations, as should we in Macedonia.

Interview conducted by Sam Vaknin

Also of interest:

Sam VakninThe author:

The author is General Manager of Capital Markets Institute Ltd, a consultancy firm with operations in Macedonia and Russia. He is an Economic Advisor to the Government of Macedonia.

DISCLAIMER: The views presented by the author in this article represent only the personal opinions and judgments of the author.

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