Aug 18, 2009

When (serious) economists take control

Simeon Djankov, the newly appointed minister of finance of Bulgaria, has some easy solutions to fix the country's finances:

"It is easy for me to force expense cuts – I simply won’t sign these files (gestures toward a pile of files on his desk), which various ministries sent and asked me to cover their costs. For example, the Road Infrastructure Agency wants BGN 109 000. I will not endorse this order. There are 300 files like that. Take the foreign ministry. This year they decided that Bulgaria would sponsor humanitarian aid to developing countries. They wanted to allocate EUR 50 000 to Sri Lanka, Bangladesh, India and another 20 or so countries. 50 000 is nothing for a huge country like India, whereas Bulgaria is small. I denied all these requests. The finance ministry wanted to sponsor two conferences costing 350 000 each in Finland and Luxembourg. I am checking into who had this outrageous idea. If I reject all the requests I’ll save around BGN 200 million."

And to obtain more cash: "revenues can be drawn from two main sources: Customs and energy...I started visiting regional Customs inspectorates. I was in Rousse, Northern Bulgaria [where they intercepted contraband right then] The contraband was worth 1 million. Customs is losing around half a billion euro each year. Over the four months left we can get 150-200 million from there. I’ll visit all regional Customs offices."

On energy taxes: "We need to find out where the profit of companies like Bulgarian Energy Holding is going. Their gross income is 5.1 billion, but the profit before taxes is 105 million i.e. profit margin of 2%. The world average for such energy companies is 20%. They are losing 18% - in other words, the sum of 900 million has disappeared!"

Let's see how long he lasts in government...hopefully a full term!

In other news, a Chicago PhD, member of the Pigou club, apparently wants to govern California.

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