Slovenia has reached a developmental crossroads. Both the professional and political public shares this perception. In order to respond to the challenges of the future, we must now thoroughly revitalise Slovene society and set up new, better developmental foundations.
In order to achieve a breakthrough, it will be necessary to change the system parameters in such a way that they can improve the institutional development climate and stimulate individuals and companies towards more vigorous and better-quality activity.
Enhancement of the development climate
Our proposal intends to influence the following most important mechanisms for an enhanced development climate:
- Motivation for activity (transfers, remuneration of work);
- Possibilities for activity (tax reform, promotion of entrepreneurship, and a more flexible labour market);
- Incentives for productivity, productive use of knowledge and employment (taxes and technological subsidies);
- Free economic initiative (privatisation, entrepreneurship and liberalisation);
- An efficient and less expensive State (restructuring of public finance + limitation of public spending + better regulation + public private partnership + drawing EU funds + national projects + elimination of court backlogs);
- An efficient welfare state (transfers + health care + pension system).
Providing these mechanisms are operative, the reform proposal provides:
- Greater economic freedom;
- Simpler and more transparent operation of the State;
- An entrepreneurship-friendly State;
- Elimination of various bureaucratic and administrative obstacles;
- A more effective ownership structure, better adapted to the market situation;
- Lower tax burdens and simplified tax regulations;
- A more transparent system of social transfers that enhances the activity of individuals;
- A more effective system of incentives for the transfer of knowledge between the economic sector and universities;
- Greater economic liberalisation of markets;
- Possibilities for investment and easier access to financial resources;
- A set of major national projects, supported by resources from EU funds;
- A streamlined healthcare system;
- A more sustainable and activity-promoting pension system.
If the proposed measures are effectively implemented, this reform should promote:
- Greater economic efficiency;
- More dynamic growth of companies;
- Greater economic growth;
- A higher employment rate;
- Greater social security and justice;
- Greater social welfare.
Proposed measures should produce considerable impact on the following areas:
1. By reforming the taxation system through introducing a flat tax rate and simplifying tax regulations, we primarily intend to lighten the burden for the Slovene economy and establish conditions for its greater competitiveness on world markets. This is an important move towards establishing systemic requirements for the achievement of the Lisbon Strategy goals, i.e. increased competitiveness of the Slovene economy, restructuring of the economy in the direction of a greater level of technological complexity, greater intensity of human capital, greater added value and an increased employment rate. Simplified tax regulations, proposed changes in corporate taxes and in the value added tax will reduce administrative and operational costs of companies. At the same time, the proposed changes in taxation of real property and assets will increase the possibility of a more rational use of real property and more productive investment of income.
2. By reforming the system of social transfers and the labour market, we wish to create an environment that will motivate people to be active and facilitate easier and quicker employment while also preserving the required level of social protection. Systems of social insurance will be adapted so as to provide an adequate level of security to future generations as well. This will encourage the development of a more flexible economy sector, which could provide more work while not being burdened by the costs of maintaining the social systems. Due to a better exploitation of resources this will enable greater economic growth without interference in the basic postulates of the welfare state. Sacrificing the welfare state or limiting entitlements is not the issue in question here, but rather the establishment of more just and sustainable welfare state in the long term, which could also motivate people to be more active. A simpler and more transparent system of social transfers will enable assistance to be received by those who truly need it, while also preventing the fairly common abuse of the social assistance system.
3. Changes in the pension system will reward those who remain in active employment longer, make it possible that specific rights can be ensured and acquired on the basis of short-term employment, encourage saving in the voluntary system, and introduce a fairer distribution of burdens and entitlements from the pension system.
4. Changes in the health system are directed chiefly towards a more efficient management of existing resources and towards incentives for more rational behaviour of both suppliers and users of health services, both of which will make it possible to better satisfy actual needs with existing resources.
5. In order to encourage competitiveness of the economy, it will be necessary to improve the business environment of companies. We propose a package of measures making access to the resources that an entrepreneur needs easier and less costly; these are measures in the area of labour, capital, knowledge markets, infrastructure and state support services, and measures that promote entrepreneurship and reduce administrative obstacles.
6. By proposing measures for the university system and the two-way flow of knowledge, we wish to improve Slovenia's use of national and foreign knowledge for its economic development. We will thus encourage the development of a more innovative and technologically advanced economy, in addition to creating better jobs for a better-educated and trained work force.
7. For efficient and faster growth of productivity, it is necessary to implement a second wave of privatisation. This time, the best Slovenian enterprises will be subject to privatisation because they are more suitable for dispersed privatisation and ownership by financial investors than the 1350 companies privatised in the first wave. The domestic non-transparent consolidation of ownership at low prices must be replaced with a process that will be open to international participation. We suggest a set of measures for the transparent and gradual withdrawal of the State from the economy, so that the State (KAD - Capital Corporation and SOD - Slovene Compensation Corporation) will no longer be involved in active management of companies, as well as various models of privatisation of companies in direct state ownership. In order to make the withdrawal of the State from the economy more effective, we suggest a package of measures for increased efficiency of the financial system, and in addition to this, a package of measures for more efficient operation of the capital market.
8. For effective financing of future development priorities, we suggest a reduction in general government spending by two percentage points by 2008 (and an additional two percentage points by 2012), as well as the restructuring of public expenditure. Parallel to this, we propose measures for improving administrative efficiency and absorption capacity for drawing EU funds, along with measures for the more effective use of these funds.
9. In order to establish a more efficient and cost-effective State, while reducing fiscal expenditure by two percentage points by 2008 and restructuring public expenditure, we propose to set up central registers for entitlements to public funds, a one-stop office for determination and exercise of social rights, a central real estate register, and to link certain institutions (such as customs and tax administration). For monitoring the financial effects of proposed legislation (in various areas: e.g. taxes, retirement, social benefits, healthcare and labour market), we propose that a micro simulation model be set up.
10. To narrow the gap between the needs of the State for investment in infrastructure and the available traditional financial sources, we suggest that additional private capital be engaged in the form of a public-private partnership. We propose that certain legislative amendments be made so as to stimulate (and no longer suppress) the business interest of private capital in financing infrastructure projects.
11. To improve the efficiency of public utilities, we propose measures for liberalisation and competitiveness of these services, which include the market restructuring of the electrical energy sector, competitive supply to final energy consumers, using the public communication structure in all public utilities, and competitive transport and logistic services.