SUCCESSFUL BUSINESSMAN Ivica Mudrinic feels that he could, as a successful businessman, offer his experience – in planning, the aspiration towards excellence and teamwork – to the national administrationOver the past few months Croatian Telecom CEO Ivica Mudrinic has established himself as one of the leaders among Croatian employers, and also of the toughest critics of the work of Croatian Government and Prime Minister Ivo Sanader. In mid February Mudrinic gave an interview to Business.hr in which he accused the Government of indolence, a lack of strategy for the recession, and the inability to carry out the necessary reforms. These statements from Mudrinic met with a significant response in the Croatian public, because it had been very rare up to then that one of the top people in the large Croatian companies would so openly and so harshly criticise Government, Mudrinic in particular, a member of the ruling party and a minister in the HDZ government of the mid 1990s. That is why many have read into his criticism and increasingly frequent appearances in public as preparations for a comeback to the political arena.

This conjecture is based on the fact that Mudrinic has been at the helm of Croatian Telecom (Hrvatski telekom / HT) for over ten years, which is many times longer that the average term at the top positions of large corporations in that sector. And that is precisely why a return to politics would be the logical continuation of his career, in the event that he decided to withdraw from the top post at Croatian Telecom. It was based on this conclusion that there were reports early this year that Mudrinic had been offered Damir Polancec's job at the post of Deputy Prime Minister, and to then take the Prime Minister's place if Ivo Sanader won the presidential elections. But, Mudrinic did not join the Government, and the alleged chief opponents of the move were members of the HDZ's right wing. Prime Minister Sanader then denied that there ever were talks, and indirectly accused Mudrinic of himself having fed the information to the public. Mudrinic himself also denied there having been any talks, but continued very frequently, suing his function in the Croatian Employer's Association and in the Economic-Social Council, to publicly lambaste Sanader's administration. Much of his criticism was justified, and the result of the pressure and demands of the employers, spearheaded by Mudrinic, was a rebalance of the budget recently adopted by Parliament, and which Government for months claimed was unnecessary.

NACIONAL: In early February you had sharp criticism of the work of Government and the way it was running a country in recession in your interview for Business.hr. Has the situation changed since then?

That interview was given at a moment when, at the global level, the financial crisis spilled over in the COVETED SHARES OF CROATIAN TELECOM Ivica Mudrinic with Robert Motusic at the time of the Croatian Telecom IPO on the Zagreb Stock Exchangeeconomy. Even the most developed nations in the world started to record a drop in industrial production, a drop in imports, a drop in exports and other negative economic indicators. The crisis had, then, already shown itself to be real and deep, and in Croatia we were listening to statements to the effect that everything was hunky-dory. In part I can understand these statements if their goal is to preserve financial credibility towards the rest of the world, but it was necessary at the same time to work proactively on preserving the integrity of the economy and the country. It was, namely, already quite clear that Croatia would face economic problems and the loss of jobs. In that context it was necessary that the employers publicly warn of the need for measures such as the budget rebalance in combination with active support for the economy. The result was that we got a ten-point antirecession plan. Point one, the budget rebalance, which is in fact the minimum essential measures, is being implemented, but we are now waiting to see what will come of the other nine.

NACIONAL: Do you have any information on when we can expect the implementation of the other measures?

The antirecession measures should already be implemented. We were late with the initiative to adopt the measures, and now we are late in their implementation. According to the information we have, most of the measures are still in the preparatory phase. As far as we know, only some have been presented. The construction ministry has started preparations to introduce a system for the speedier issue of construction permits, and the tourism action plan has covered only an easing of para-fiscal levies and a liberalisation of the visa regime. In the meantime, in the Mediterranean surroundings they have already offered package deals at attractive prices, and on the long term, we have heard nothing about the strategy t offer additional tourism content, which means more than just accommodation and a nice sea. I think that the ten-point antirecession plan is good as a foundation, under the condition that its implementation is sped up and that the economic situation does not get worse over the coming months. Many indicators are, however, showing that the recession has had deep repercussion in Croatia and, for example, retail sales dropped by almost 20 percent in February, while car sales have dropped by 40 percent over the past three months. If there is a drop in the GDP of as much as 4% in the coming period, which is one of the realistic scenarios according to the IMF, we have to have a plan for the further reduction of public spending and to support the real economy.

NACIONAL: Nevertheless, the real economy is hardly helped by a ban on Sunday shopping.

With all of the external disorders we know face, we have with this decision caused further hardship for our economy and tourism industry. When it became clear that there was a recession coming the decision should have been reconsidered, and postpone its implementation for at least a year. Had the resources that have been expended for several years on this legislation been used for issues of key economic importance, such as, for example, the reform of the civil service or the strategy for key branches of the economy, who knows how far we could have come!

NACIONAL: In the cited interview you accused Government for lacking strategy. Are you still of this opinion?

IVICA MUDRINIC with the Prime Minister and the Deputy Prime Minister Damir Polancec of whom it was rumoured that he could replace him. Mudrinic says that the speculation is not foundedIn my opinion, we do not today have a real vision and strategy of national development, nor have we had one since achieving independence. We were negligent then because we failed to articulate a vision of our own future, we did not opt for a system of values, and failed to make a plan for the development of Croatia on the basis of that vision and those values. We know that we want to be a NATO and European Union member country, but that is just the frame, while we have not defined what kind of country and society we want within that frame. Are we committed to the value of labour, honesty, the respect of knowledge and education, respect for differences and so on? At the level of economic development I believe that we have to, above all, wisely decide what activities we will concentrate on, and in what sectors we want to excel, because we cannot compete with larger and more powerful countries in everything. I am, for example, certain that we can be competitive in tourism, agriculture, some areas of high tech and that we can make a significant breakthrough in energy. We can probably also compete in some other sectors, but it is important that we focus on what we can excel at. But these decisions should not be made by one man, or one political party, instead we should really achieve the widest possible, supra-party social consensus. If we could achieve that consensus then the term in office of a capable Government, or several in a row, would be the effective operationalizing of this strategic program.

NACIONAL: many have interpreted your interview as the result of your desire to get back into politics. There has been speculation in the press that Prime Minister Sanader asked you to join the Government, and then abandoned the idea. Is this true?

This information is absolutely incorrect. Neither did I approach anyone in Government, nor did anyone in Government approach me. It is unfounded speculation. I had already, before that interview, in Novigrad, in October of last year, and on several other occasions, sharply criticised Government, that is to say the unwillingness to admit that a crisis is at our door and the need to introduce emergency measures. But the crisis was not so close to home at the time, and those statements were not remembered in that way.

NACIONAL: But you can hardly deny that you have had more public appearances over the past four months than in the past few years. Some say tat it is a planned campaign.

No situation in the past few years can be compared to the present global crisis. I concluded that I had two choices. One was to fully and to the best of my ability fulfil all of the tasks that the functions I have in the Economic-Social Council, the National Competitiveness Council and the Croatian Employer's Association, and the other was to withdraw from these posts and open the way for someone else. I choose the first option because I believe in personal responsibility, and because I feel that as a Croatian citizen and businessman, who cares about the betterment and development of this country, is also duty-bound to try to act constructively in a time of crisis. And besides, I believe that at this point in time it would be useful to apply the experiences of the private sector in the Croatian civil sector, because the private sector cannot survive on the market unless it sticks to a clear strategy, planning and comparisons with those who are successful in the region and in the world.

NACIONAL: But, you do not deny that you have political ambitions.

Every one of us wants to make a contribution to society, have a hand in making it better, to do the job that needs to get done. I would be more apt to call it a political spark in myself, an interest in the issues of general public interest, and not necessarily a concrete political ambition. The fundamental precondition for my decision do take on any other job, and even for a possible return to politics, would be the sense that I can contribute more to society by that change.

NACIONAL: Is there any truth in the rumours that you are considering running in the presidential elections?

A nomination for any political function would presume a decision to get back into politics. I have given my honest answer as to why I have made a more significant public engagement, and I stand behind that. And as far as speculation is concerned, there is no end to them anyways.

NACIONAL: You said that you want to apply the private sector model to the civil sector. Croatian Telecom is one of our most successful companies. In what regard can it by a paragon to the state?

Croatian Telecom has a clear vision and strategy, and brilliant teams of experts, who understand the company's mission and are capable of seeing it through. We are oriented towards the market and offer Ivica Mudrinic was on good terms with former president Tudjman and a minister in the 1990sproducts and services that suit the needs of our users, both private and commercial, and by doing so contribute to the development of the entire society and country. We are investing in the future – building the infrastructure of the 21st century. We can do it all because we have effective management, continuous process improvement and are introducing new technologies. We conduct necessary restructuring with a high level of social sensitivity. We also have a special department that cares for employees entering the open labour market, and a part of our former employees continues to work with us through many Croatian companies, our partners, especially in areas that are not part of our key activities. We have introduced and are improving a system of work effectiveness, which is a highly motivating factor for those who invest their effort and capabilities, that they be appropriately awarded and promoted. To achieve these goals you need a corporate culture that clearly promotes a set of values: an orientation to the user and innovation, teamwork, the culture of excellence...

NACIONAL: Contrary to your opinion, many in Croatia, including some union leaders, accuse your company of reaping extra profits at the behest of foreign owners.

These kinds of accusations have no foundation whatsoever. The ownership stake of Deutsche Telekom in Croatian Telecom is 51 percent, while smaller stakes are held by Croatian Government, the Veteran's Fund and thousands of small shareholders of the stock exchange. We have the interests of all of our shareholders in mind, and have at no time been under pressure to increase or retain our profits. If the last ten years or so of the development of Croatian companies is based in part on foreign capital, then that foreign capital now has to be adequate valued and treated as domestic capital. We are in a constant contradiction: we say that we have to allow capital to come to Croatia, and when that happens, then we want to make doing business impossible. Instead of debating over domestic and foreign capital we should be making an effort to create a setting that will attract capital from abroad and domestic capital to stay. If we can achieve that the side effect will be the introduction of new technologies and knowledge, and the creation of new values. These new values create new jobs, put money into the national budget and allow the state to carry out its social programs. We have opted for that kind of system. That is why criticism of foreign capital is very damaging, because in essence they bear the message that it is not wanted in Croatia, which could have catastrophic consequences.

NACIONAL: You are often at odds with the unions and a year ago were among the chief opponents of increasing the minimum wage, but recently you supported the unions saying that doctors and teachers earn too little. Is this not a somewhat inconsistent position?

I have never been opposed to increasing the minimum wage. The minimum wage is a social category, and even a question of dignity, and there is no doubt that the current level is too low when compared to the basic cost of living. The Croatian Employer's Association, and I personally, have supported establishing this minimum wage, we wanted only to guarantee that certain industrial sectors be given time to prepare or adjust so that there would not be a loss of jobs. In that regard, we have advocated support for sectors like the textile industry where we need to secure government support. And as far as the wages of doctors, teachers and other socially very responsible occupations is concerned, it cannot be said that it is not appropriate for a specialist doctor to live off 6 and a half thousand kuna a month. It is equally inappropriate that a teacher with 7 years of service to earn 5 thousand kuna. What set of values is a society defining when it attributes that worth to these professions? If we are not going to pay these occupations appropriately, then we have opted for a future in which knowledge and expertise are not valued.

NACIONAL: But was it not the employers in fact who advocated scrapping the 6 percent raise for those employed in the civil sector?

The employers request that public spending be curtailed is not the same as demanding a reduction in wages in civil services or to hose employed in the ministries. Neither the Croatian Employer's Association nor I personally advocated a reduction of wages, but rather for a balanced budget. It is an irrefutable fact that the level of public spending in Croatia is too high and that we spend more than we earn. This has to stop and employers have been warning for years that this can only be done by increasing the efficiency of the civil service. When you need to reduce public spending "overnight", as is now the case, and reforms have not been implemented, they your only option is to cut costs across the board, and slash wages among other things. So, their wages should go up, but with public spending going down at the same time, which presumes a thorough reform of the public sector. And by reforms I mean a serious amount of room we have in the national and local administrations for rationalisation and a change of system in a way that increases efficiency, rewards efficiency and attracts and retains the best experts, which is currently very far from the case.

NACIONAL: You advocate a rationalisation of the civil service, but that by necessity includes firing some people. Will Government have the courage to make such a move?

Every reform is painful, but all inefficiency is penalised sooner or later. The worst penalty is to winding up in a crisis, like what is now happening to us. Government will have to understand sooner or later that the civil service is part of a critical chain and that many social processes are dependent precisely on the efficiency of that sector. You cannot have a competitive economy if it is dependent on an uncompetitive civil service. The problem is that we did not implement these reforms in happier times, and that we now have to implement them in a time of crisis, which is always harder. Nevertheless, we have to keep in mind that the reform of the civil sector will improve the economy's competitiveness, which will allow the economy to grow and create new jobs.

NACIONAL: Economists say that the roots of the Croatian crisis reach back to the 1990s. You were a member of Government then, and could have started the necessary reforms then. Do you think you could have done some things better?

Yes, as maritime affairs, transport and communications minister I was a member of Government from 1992 to early in 1996. We were at war in those years, during which the ministry worked intensively on developing telecommunications. We started by laying fibre optic cables, introducing complete digitalisation and making land lines available in every village, we opened air traffic after breaking off ties with Belgrade, and maintained road, rail and maritime traffic. Many good things were done then, but there were also many oversights. We created a state, but did not know how to articulate what kind of country we want to be. This situation led us to a quiet isolation, to no influx of foreign capital, to a destruction of values, to a loss of enthusiasm and élan after the war and independence, to the outrage of the public… In other words, we created a state, but did not allow it to develop. But the mistakes that were made then do not justify the current situation and inactivity. Since we did not set a system of values and a clear vision of our future, it is all the more urgent that we do so now without delay.

NACIONAL: You have been at the helm of Croatian Telecom for ten years now, but your success in business has been rarely noted in the public. On the other hand you are often criticised for the large wages you receive. Does this bother you?

There is no doubt that I earn a lot of money, especially in Croatian terms. But there is also no doubt that my wage was set by the supervisory board, as the representative of the owner, and that it reflects the value of the assets I am responsible for. And its variable portion is dependent of the market success of Croatian Telecom. Our press recently published a comparison from which it is evident that I would earn significantly more for this job, i.e. responsibility, in Europe, to say nothing of the USA. And at Croatian Telecom we have also decided, even though we are not obliged to do so by law, to make public the wages of all members of the board, because we believe in transparency and believe that the shareholders and the public have a right to know. And that is why I regard criticism of my wage in the context of the generally poor attitude towards businesspeople in Croatia, which is a result of the lack of a system of values. What is it in fact that we advocate? Are we going to adequately value people based on the level of responsibility, work, created value and results they have – or not? I believe that these values should be transferred into the public sector, and if we were to do so, the capable and effective would be adequately paid, their work would not lose its dignity, and they would not "flee" to privately owned companies.

NACIONAL: How do you explain such a poor attitude in the public towards businesspeople?

Instead of preserving a certain measure of the social values of the former system, we kept the mentality of socialism, but embarked into capitalism, that is to say, we took the worst of both systems. We all need to have, and don't need to work. Capitalism has other rules based on which work and results are rewarded. I do not think that Croatia needs hard, neoliberal capitalism, but rather capitalism with social moderation, in which work and results are valued, with a high level of social rights and a necessary dose of a social safety net. And, as a result of many cases of improper privatisation, as a result of political appointments in the public sector, we have not established a clear correlation between success and wage. The result of its all is a poor public attitude towards businesspeople.

NACIONAL: how should this capitalism look?

Many debates have been opened at the global level on how to structure economies and create a more equitable distribution of wealth. Capitalism provided for the concentration of capital in a group of nations with a relatively small percentage of the world's overall population. And this current crisis will probably have as its effect at least the partial redistribution of global material wealth. At the level of society, Croatian society included, we need to re-examine our attitude and relationship towards labour, success and capital. In Croatia the average age of a retiree is 49. The current situation in which a very small percentage of the population creates the material value off which the entire population lives is not sustainable. We probably need to find a way to create more and to include a wider base of the population in active work. That kind of system would allow us to secure an adequate level of social rights for all: healthcare, that every child has the right to a free education, not just in elementary and secondary school, but also at university. Social protection needs to be just that – protection in the event of real need, and everything else has to be based on measurable expertise and capability, complete transparency and fair relationships in society. But it all hinges on a consensus on values, on a common vision of our future and on clear sector strategies.