Policy Documentation Center

National identity as a problem of political Ukraine

Badun, Marijana

107
A CITIZEN’S GUIDE TO THE BUDGET
katarina Ott et al., 2009, Institute of Public Finance and Friedrich Ebert Stiftung, 
Zagreb, pp. 98
Review*
The Institute of Public Finance published the first edition of A citizen’s guide to the 
budget in 2000. This is now the second, revised edition, published in both Croatian and 
English, in cooperation with the Friedrich Ebert Stiftung. The authors are katarina Ott, 
Anto Bajo, mihaela Bronić, Vjekoslav Bratić and Danijela medak Fell, all of them em-
ployed at the Institute. 
As the very title suggests, this booklet is aimed at citizens who want to understand 
the budget, budgetary process and main budget terms. For budgets have always been an 
interesting and topical subject, and, given the accumulated problems in the Croatian pub-
lic sector, can be expected to remain right at the focus of public interest. At the same time, 
it is often confusing, not only for regular citizens, but also for the members of parliament, 
the members of county assemblies and city and municipal councils, to understand the dif-
ference between e.g. the national budget, general government budget, and consolidated 
general government budget. If citizens cannot understand the basic budget terms, how can 
they act to improve the existing situation in the public sector?
The Guide consists of three parts. In the first part, which takes two thirds of the Guide, 
the authors gradually introduce the reader to the basic information about the budget:
First they provide a general definition of the budget and discuss the national budg-•	
et, its users, functions, principles, structure, and revenue and expenditure account, 
expenditures according to different classifications, the measures of the national 
budget deficit/surplus, and the financing account.
After discussing the national budget, the authors present the budgets of the extra-•	
budgetary users of the national budget, their users, revenues and expenditures. This 
leads to the consolidated central government budget.
The presentation of the central government budget is followed by the budgets of •	
local units, their users, revenues and expenditures. 
Then the authors discuss the consolidated general government budget, its deficit •	
and the consequences of it, i.e. public debt and general government debt.
Finally, the authors deal with the size of the state.•	
* Received: January 26, 2010
* Accepted: January 29, 2010
108
K. Ott: A citizen’s guide to the budget
Financial Theory and Practice 34 (1) 107-108 (2010)
The second part describes the main participants in and phases of the budgetary proc-
ess, from the budget planning and preparation to the budget execution. The third part 
should provide a basis for citizens to use the information from the previous two parts in 
an attempt to monitor the budget and contribute to its improvement. The Guide ends with 
a glossary and some useful references.
The Guide is rich with data. Wherever it was possible, the authors included numbers 
for Croatia, ending with the 2009 budget plan. The data are clearly presented, usually in 
graphs, and show the general trends in Croatia’s public finances. This then makes it easy 
to identify the main weak points in Croatia’s budget. 
It would be exaggerated to say that every household in Croatia should own a copy of 
this Guide (although it can be downloaded free of charge from http://www.ijf.hr/eng/budg-
et-guide/guide-2009.pdf), but it is a very useful publication. It could be particularly use-
ful to students, journalists, and NGOs. Students could benefit by understanding not only 
the basics of the budget, but also citizens’ rights and responsibilities. Journalists might 
find the Guide useful in being able to present these topics to their readers. NGO’s could 
benefit by being able to better achieve their goals like promoting the rights of margina-
lised groups or fighting corruption. The Guide is in general a good tool for decreasing cor-
ruption, since it promotes the availability of information.
As the authors point out: “Our goal should be to have sound, efficient and equitable 
public finances, in accordance with our possibilities and needs. And it is the budget that 
shows the condition of public finances, as all public funds flow through the budget. To 
achieve this goal we need sound public policies based on the accountability of all levels 
of government. The main prerequisite for government accountability is transparency. And 
then, who if not us, the citizens, will require transparency?” This Guide should motivate 
citizens to be more active in the budget process, to communicate with the authorities, and 
demand the publication of relevant budget information, which should all result in public 
goods and services aligned with citizens’ interests and needs, as well as fewer opportuni-
ties for corruption. Decisions on the way large amounts of taxpayers’ money are spent 
should not be left only to politicians and various interest groups.
Marijana Bađun
Institute of Public Finance, Zagreb


English

A citizen\u2019s guide to the budget

Balogh, Csaba

Koczan, Gergely

Secondary market trading infrastructure of government securities

Fondation pour l\u2019innovation politique Notre Europe

Think Global - Act European: The Contribution of 14 European Think Tanks to the Spanish, Belgian and Hungarian Trio Presidency of the European Union

Guriev, Sergey

COMPANIES  May 8, 2009, 1:23PM EST
Why Is Russia's Productivity So Low?
Russian companies are still among the least productive in the industrial world, but the
downturn could provide a catalyst for big improvement
By Jason Bush
On the face of it, Russia's economic performance over recent years has been impressive. But today, amid
plummeting gross domestic product and sharp falls in industrial production, there's a new awareness that Russia's
economy is also beset by deep-seated problems. Despite almost two decades of market reforms, the country's
labor productivity, a key indicator of overall economic efficiency, remains one of the lowest among industrialized
nations. Several studies have been published recently underscoring the scale of the problem.
According to one of the studies, by Strategy Partners, a Moscow management consultancy, Russia's average labor
productivity is just 17% of the U.S. level. The amount varies by sector, from a low of 6% in machine building to a
high of 22% in the natural resource industries. But the room for improvement is colossal everywhere. "If, in Russia,
a mere 10% of workers had the same level of productivity as in the U.S., Russia's GDP would increase by one and
a half times," notes Alexander Idrisov, managing partner of Strategy Partners.
Similar conclusions have been reached by the U.S. consultancy McKinsey, which has also just published a report
examining Russian productivity. McKinsey, which focused on six sectors, concluded that Russian productivity was
around 26% of the U.S. level. That's an improvement on 10 years ago, when McKinsey estimated Russian
productivity at 18% that of the U.S. But widespread inefficiencies remain. For example, it takes three times as many
workers to produce a ton of steel in Russia as it does in the U.S.
Russia's productivity looks bad even in comparison with other emerging markets. In 2007, the World Bank estimated
that revenues per worker in Russia were only around $7,000 per head per year. That's around 20% lower than in
India, and 40% lower than in China. The figure is especially troubling when you consider that Russia's labor costs
are about double the level in either India or China.
OUTDATED TECHNOLOGY
Why is Russian productivity so low? "Why should it be high?" asks Boris Kuznetsov, chief researcher at the Higher
School of Economics in Moscow. "Let's look at the history. Very few big enterprises were constructed in the last 20
years, so the technology is old. In China, you have very cheap labor and up-to-date technologies because they were
imported recently."
But though outdated technology is often a problem, many experts emphasize that it isn't the actual root of Russia's
productivity woes. "It's a big myth that we have low productivity because we have old technology," says Idrisov from
Strategy Partners. "In general, the major factor is very ineffective business processes and organization."
For example, he notes that big Russian carmakers today produce around 85% of their own components. Such
in-house producers are geared to one customer, so they are too small to reap the benefits of economies of scale.
The lack of competition also means they have little incentive to innovate or improve quality.
Other Soviet relics are found in areas as diverse as worker compensation, sales and distribution, and accounting. In
its recent report, McKinsey attributes just one-third of the productivity gap in the Russian steel industry to outdated
manufacturing technologies. The remaining gap is caused by inefficiencies such as poor work organization, low
levels of IT and automation, and bloated middle management.
WIDE RANGE OF EFFICIENCY
Why Is Russia's Productivity So Low? - BusinessWeek http://www.businessweek.com/print/globalbiz/content/may2009/gb200...
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But this prevalence of inefficient methods also provides some solace, implying huge potential for improvement.
Another finding of recent research is just how much variation there is between firms in the same industry. McKinsey
notes that despite the low sector average, the best Russian steelmakers have productivity that is almost as good as
their U.S. peers.
Such variations are the norm in every industry. In a recent industrial survey, the Higher School of Economics found
that, depending on the sector of the economy, the productivity of the top 20% of Russian firms is between 6 and 12
times higher than the productivity of the bottom 20%. "In any industry in Russia, you can find quite good and
competitive firms, and very bad and uncompetitive firms," says Kuznetsov. That suggests that, properly managed,
even companies in depressed industrial sectors have the potential to become competitive.
True, better management alone won't solve all of Russian industry's problems. Another finding of the Higher School
of Economics' research is the key importance of geography in explaining the productivity gap. The worst-performing
factories are typically located in small towns, often remote and with just one or two big employers. And in Russia
there are many such towns. "Most inefficient enterprises can't be modernized. It would probably be better just to
close them," says Kuznetsov. "But that is not very easy because it creates social problems."
The prevalence of single-company towns helps explain why Russia's politicians are often reluctant to allow factories
to go bankrupt. As with governments in other countries, Russia has provided bailouts during the economic crisis
(most notably a $1 billion package in April for Avtovaz (AVAZ.RTS), Russia's largest carmaker).
BEYOND BAILOUTS
But in general, economists have been pleasantly surprised by the government's relatively hands-off approach to
industry during the crisis. "The good news is that the government is saying, 'Stop asking for money,' " says Sergei
Guriev, rector of the New Economic School in Moscow. He says that instead of bailing out inefficient enterprises,
the government should fund retraining, small business creation, and labor mobility to mitigate the consequences of
factory closures.
Another way the government can help is by improving Russia's overall investment climate. The analysts agree that
foreign direct investment will be an especially important catalyst for industrial modernization. According to Strategy
Partners' analysis, no less than 75% of productivity improvement in emerging markets is the result of FDI. In Russia,
too, the most efficient industries tend to be those, such as the brewing industry, that have the highest share of
foreign direct investment. Russian companies that have enhanced their efficiency invariably say foreign partnerships
have been a crucial stimulus to change.
That's why the issue of Russia's industrial competitiveness can't be separated from the wider question of Russia's
investment climate and image. Foreign investors are routinely put off by legal uncertainty, corruption, and
bureaucracy. "If Russia had better institutions—competitiveness in a broad sense—it would be faster to react to the
crisis and faster to restructure," says Guriev. "What needs to happen is for the crisis to change the mentality of
policymakers and bureaucrats."
Under pressure from the crisis, Russian companies are beginning to change their inefficient habits. Perhaps the big
question now is whether the crisis will also compel Russia's government to embrace reforms, now more essential
than ever to support the transformation of the Russian economy.
Bush is BusinessWeek's Moscow bureau chief.
Copyright 2000-2009 by The McGraw-Hill Companies Inc. All rights reserved.
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Why is Russia's productivity so low?

Final report on the conduct of the electoral process for the parliamentary elections, JUNE 28, 2009

Is Macedonia ready to start negotiations for EU membership regarding Chapter 27?

  
 
4 Reasons Why Obama Picked My University 
07 July 2009 
By Konstantin Sonin  
U.S. President Barack Obama’s commencement address at the New Economic School, or NES, on
Tuesday has been billed as his third major foreign policy address since taking office, after his Prague 
and Cairo speeches.  
Why did Obama choose NES?  
First, it is important that NES is a new institution, founded in 1992. Similar to the way Obama
represented a new political paradigm for Americans who voted for him, NES also represents a new
paradigm for the modern study of economics.  
Second, Obama is the first U.S. president in many years to have built his political career not by dividing 
voters into separate ideological camps, but by searching for pragmatic and nonpartisan solutions. After
70 years of ideological domination by the state, the NES is continuing the traditions begun by such
great Russian economists as Yevgeny Slutsky, Nikolai Kondratyev and Nobel Prize winner Leonid
Kantorovich, whose work rose above ideological or national boundaries, as it should be in any
scientific field.  
Third, Obama knows what it means to overcome difficulties. Not only is Obama the first black 
president, he is also one of the best examples of a self-made man. The New Economic School also 
overcame difficulties. It turns out that a university can have as few as 200 students and yet be the first
Russian institution to which graduates regularly return after receiving Ph.D.s abroad at top universities.
Seventeen years after the school’s founding — and after the first 10 years, during which it relied on
visiting professors — the school’s teaching staff now consists almost exclusively of returning 
graduates, an impressive achievement given Russia’s traditional problem of brain drain. 
Fourth, and not surprisingly, economics institutions receive more attention than usual these days. For
economists, the global crisis is comparable in significance to the return of Haley’s Comet for
astronomers. It will be interesting to hear what Obama says.  
 
Konstantin Sonin, a professor at the New Economic School/CEFIR, is a columnist for Vedomosti. 
 
 
© Copyright 2007. The Moscow Times. All rights reserved.  
 


4 reasons why Obama picked my university

  
 
 
Status Quo Restructuring 
16 July 2009 
By Konstantin Sonin  
Recent events concerning two automakers — GM and GAZ — underscore the difference in the U.S. 
and Russian governments’ approaches to dealing with the economic crisis.  
The U.S. government acted decisively. The previous GM owners were replaced, creditors received as 
much compensation as was possible under the circumstances, and last week the giant automaker
emerged from bankruptcy proceedings. Freed of more than two-thirds of its former debt load, the 
company now has a fighting chance in today’s difficult automobile market.  
The Russian government, however, could not even carry out the first step in restructuring GAZ —
removing Oleg Deripaska as the owner of the company. In addition, rather than writing off its debts,
the firm was granted state guarantees on new debt. 
When a company cannot meet its debt obligations and the owner is not replaced, this is always a
recipe for disaster. In an economy that is functioning properly, ownership of such companies is
transferred to either its creditors or to someone who can settle the demands of the company’s
creditors. The new owner then decides the fate of the company’s managers; in some circumstances,
it may choose to retain them.  
But this approach is unworkable for state-owned businesses because they almost always have
access to budgetary funds to pay off their creditors. In this situation, managers are always less
motivated to restructure, and this is precisely why the granting of additional funds to state-owned 
businesses should always be accompanied by a sweeping reorganization of its top management.
Without following that simple rule, the provision of state guarantees is, in effect, an even more
ineffective form of support than subsidies. After receiving subsidies, managers have some form of
stimulus to restructure their operations, but state guarantees are a direct invitation for a company to
continue the status quo — that is, continue getting involved in the kind of unjustifiably risky projects
that got them into trouble in the first place. 
It requires a lot of political willpower by a country’s leaders to compensate creditors and redistribute
ownership of a failing state company. Dealing with politically vital enterprises that have gone bankrupt
is no easy task for any government. The U.S. administration used all of its leverage to force GM 
creditors to agree to the terms of restructuring.  
In Russia, the government’s policy toward bankrupt companies has been based not on what is best
for the economy, but according to what connections the company owner has with the ruling elite. GAZ 
and AvtoVaz, which received enormous federal funds to prop them up, are vivid examples of
government inefficiency and incompetence.  
Since a significant part of the world economy is in recession, Russia’s economic slump — although 
one of world’s worst — is not drawing a great deal of attention. But as soon as other countries that
have efficient government institutions begin to pull out of the crisis, it will become clear that Russians
should  have demanded a lot more from their government. 
Konstantin Sonin, a professor at the New Economic School/CEFIR, is a columnist for Vedomosti. 
 
 
© Copyright 2007. The Moscow Times. All rights reserved.  
 


Status quo restructuring

Preasca, Ion

The New Draft Law on Electricity in the Context of the EU-Moldova Action Plan Implementation