Valeriu Lazar: The biggest stupidity one can do now is to fire people
He was twice the Minister of Economy of Moldova, founded and runs a consulting company, knows from the inside how the state works, and at the same time he understands the problems of business environment. In an interview with InfoMarket, Valeriu Lazar, Director of Business Intelligent Services (BIS), shares his opinion on the impact of the crisis on the business, urgent actions and prospects, as well as decisions that could become fatal.
InfoMarket: Is it possible to give an assessment of what is happening with the business?
Valeriu LAZAR: Business today is like during a storm at sea, when you cling to any opportunity to survive. It is not yet clear when and how it will end, but it is completely clear that we will no longer return to previous state. This is a good reason to review many things. The only pity is that this comes at a great price.
InfoMarket: Which sectors, in your opinion, have suffered the most from the crisis, who is a really very bad situation?
Valeriu LAZAR: Let's not see all in black, or only in white, and we should not generalize. We have not yet passed the peak, although we can already see the industries that are obviously damaged. There are companies that have closed due to administrative decisions. But even here I can’t say that everything is lost. Real entrepreneurs immediately saw opportunities for themselves. For example, restaurants: they closed, but no one hinder them from cooking meals, cooperating with transport companies, which have reduced the volume of services, and deliver food. It’s hard, but not all is lost.
Many industries can transform and adapt to new conditions, for example, production can be reformed. It is time to activate the entrepreneurial instinct - if it exists, think quickly and see opportunities behind the problems, act.
There are sectors in which companies cannot work due to objective reasons, and one of them is tourism. They just have nothing to do now. But even in your forced idle time, with the right management and attitude, one can plan new tourism products for the post-crisis period.
And the services sector, such as consulting and auditing, continues to work at 90-95%. Yes, there are difficulties, the need for social contacts and direct communication has not been canceled, but business does not suffer much from this. At least, if some consulting company complains and asks for help, I will say: “Guys, I do not believe you!”.
InfoMarket: Some industries, on the contrary, even make money on this crisis. Retail chains or pharmacies, for example.
Valeriu LAZAR: I would not say that. Today, operating stores themselves are not happy with the increased demand. Families used to shop for a day or two, now they shop for a week ahead, and this creates an additional burden on the store’s logistics processes. But everything settles down. In general, economists use the concept of deferred demand - the opposite is now observed. Another thing is if 100 thousand new consumers appear in the country (I’m talking about our fellow citizens returning from abroad) who will find themselves in the labor market and will have normal purchasing power then, in the medium term, there changes will take place.
InfoMarket: And what about people who traded in the open-air markets and are now left without a livelihood?
Valeriu LAZAR: Indeed, many people worked in the open-air markets and, unfortunately, many are forced to stay at home. They need help to find themselves in the labor market. This can be done competently so that people do not suffer, and the system is cleared of unfair competition and tax loopholes. It is important to understand that in open-air markets merchandise is commercialized mainly by large merchants who operate through thousands of patent holders and avoid paying taxes. The same merchants are now probably selling part of their products through organized networks, and the state already receives taxes from this. But ordinary people, with real income needs, were left without work, and now is the time to think about providing them with alternative civilized forms of employment.
InfoMarket: How do we do this?
Valeriu LAZAR: By creating new and developing existing platforms that would help the employer to meet with the employee. Moreover, this is a moral obligation of the state! I have an example of how, during one of my mandates as Minister of Economics, we fought with the sale of second-hand clothes. I received a delegation of protesters on this occasion from Calea Basarabiei’s market, but I also invited several directors of light industry enterprises. The puzzle has come together: women from the market complained on low salaries and poor working conditions, and that the state takes away their last bread, and the heads of enterprises immediately offered them jobs in human conditions with a guaranteed high income. On this stage the "riot" of merchants ended.
InfoMarket: What do you think should not be done during a crisis?
Valeriu LAZAR: The worst thing currently is to behave like a person who felt into a quagmire. Sudden movements will not lead to anything good. We must act, but not twitch and do stupid things. And the biggest stupidity in difficult times is to fire people. Only the manager and owner know how much work it costs to put together a good team, and in no case should it be lost, no matter how difficult the situation gets. Yes, one needs to use the optimization opportunities, but also to figure out how to keep busy people who stay at home. Not just pay them money, but also provide work, monitor its implementation. And this is a test of the strength and professional suitability of management!
InfoMarket: Many companies just send their people on holidays at their own expense or sharply reduce their salaries ...
Valeriu LAZAR: For an ineffective manager, this is the most “suitable” moment and the easiest solution. But turn on your brains! It is necessary to find a point of balance, already at a different qualitative level, so that you would not lose your business or your employees. Currently we have a good reason to use all reasonable opportunities to improve business performance.
Responsible entrepreneurs always keep an untouchable reserve to ensure the operation of their company for 2-3 months, at least to cover the payroll and taxes. We didn’t come up with this. It is not for nothing that the IMF demands from the National Bank such a size of foreign exchange reserves that would ensure three-month imports. What prevents implementing this at the enterprise level? Even ordinary households have reserves in their basement for several months, isn’t that so?
I will seem cynical, but why do we need such businesses that cannot last a month or two?! Not everyone will pass strength filters. On the other hand, this way the economic environment will be “cleaned up”, only effective companies will remain, and new ones will come – in the real market economy there are no voids. The current crisis is a test of the strength of managers and entrepreneurs, and of business morality too.
InfoMarket: How will the return of our compatriots who have worked or lived for many years abroad affect the development of the economy and business?
Valeriu LAZAR: This is a very relevant question. It all depends on the scale. Its on situation if 5-10 thousand people will return, and quite another, if 50-100 thousand will... On one hand, it is already clear that many returnees will not leave anywhere. They will see that home is still better: reality shows that our people abroad are mostly strangers to those places. On the other hand, in economically developed countries the already difficult demographic situation will worsen, they will need young, able-bodied people. And countries will fight for them. The crisis will pass, and someone will need to work. So, it’s too early to judge the scale of the return process.
I want the able-bodied citizens to return and not leave anywhere. At first, this will negatively affect foreign exchange earnings, but in the future, I see more advantages. The number one problem in Moldova is the shortage of skilled workers. This slows down both the attraction of investments and the development of new projects. Even if 50 thousand people return and remain in Moldova, then this is workforce and potential entrepreneurs. The state needs to be prepared to work with them. The state urgently needs to review all existing business support programs in terms of creating conditions for the reintegration of people returning to the country.
InfoMarket: Why separate them into a separate caste? There are many investment support programs ...
Valeriu LAZAR: I am not saying that they need to be created special conditions and thus discriminate those who already work in the country. We just need to consider that returning fellow citizens need to be helped to reintegrate faster. Not everyone will open their own business, many will seek work. Together with professional associations, enterprises, it is necessary to establish work sites where a potential employee can meet his employer. The state and business should do this together, and preferably right now.
Our compatriots in this category are contacting our company with a request to advise in starting a business. These are people who six months ago did not want to hear about returning to Moldova. You can imagine how powerful this driving force can be for the entrepreneurship development!
InfoMarket: Many enterprises have entered the crisis having bank loans, and this is a big problem for their survival when facing a reduction in turnover and income.
Valeriu LAZAR: I am impressed by the fact that the authorities urged credit organizations to meet the needs of borrowers. The National Bank showed flexibility in regulations and allowed banks to communicate more freely with their customers. Banks themselves take initiatives within the framework of the regulatory framework, for example, they offer deferrals for current payments, although such “re-separation” does not fundamentally change the situation. Now there is only a respite, which has a temporary effect. Interest on the balance will soon accumulate (albeit without interest), and in three months the amount will triple, and it will still need to be repaid - either immediately or gradually. Therefore, more ambitious approaches and solutions suggest themselves, while on both sides.
Banking business rests on debtors, and bankers - conservative but reasonable - want to keep it. Banks are ready to negotiate with borrowers, but expect updated business plans from them, considering realities and new prospects. The bank wants to see that the entrepreneur understands the situation and does not just ask for a delay of three months but updates his plans and processes. Bankers can even add money and help improve the situation faster. After all, the bank’s main goal is for the client to develop and lend in the future.
Several companies have addressed our company, who are already preparing new feasibility studies for new projects and on-lending. This awareness is very pleasing! The banker must be sure that the businessman really looks at things and does not try to hold out at the expense of the creditor for another 2-3 months, then to die.
InfoMarket: Business expects real support from the state ...
Valeriu LAZAR: In the current situation, I see two completely different approaches in the relationship between business and the state. Firstly, today we can understand how the concept of social responsibility of business, or, more simply, the level of elementary morality and decency functions in our society. Everyone is in difficult conditions, but there are companies that understand that the state is in a very difficult situation and come to the rescue. But there are entrepreneurs who claim that the state owes everything to them, including recovering losses by 100%. Why on earth?
Secondly, there is an understanding and desire of the government to help enterprises survive through the crisis. I don’t want to go into details which government decisions are effective or not quite, but the very understanding of the importance of support is the right direction. This year, at least, the state will bear the most serious budgetary expenses in order to cope with everything, to put out the fire, and then to clear up the rubble.
But there is one terrible thing which is detrimental from the point of view of preserving the economy and business - it is populism from certain politicians and “outside observers”. They aggravate the situation by promising everyone without exception support, by demotivating the business that paid all this time. Everyone is trying to make himself a defender of the interests of the masses and business, but the essence of normal economic relations is distorted.
InfoMarket: In this situation, how advisable is it to free the population from paying for utility bills? Such suggestions were voiced ...
Valeriu LAZAR: Behind utilities there are enterprises and people who deserve a salary work; raw materials are purchased and further along the chain. Moreover, we have a system of helping people with low incomes, we must act through it. There is no reason to exempt everyone from service charges. There are people who need to work, and moreover, to support the state through paying taxes to help those who really need it. Paying taxes in this situation is the best help to those who are really left without a piece of bread, or to those who have lost the remittances sent by relatives from abroad! Their relatives are in a situation when they can no longer send money, even more – they themselves need to survive and cannot return. The state should not break down the economy on which budgets are built - including the social fund and health insurance, but use and capitalize, improve existing assistance systems that are aimed at specific people.
InfoMarket: On the one hand, the state is now in dire need of money, on the other, a business that provides budget revenues and jobs suffers no less and is waiting for support in order to continue to be able to replenish the treasury ...
Valeriu LAZAR: The state has a reason to review the entire system of tax incentives for business. I’m not even talking about individual industries, but about incentives for businesses with high added value in all sectors, which in the long run will ensure wage growth, as well as achieve the main goal of improving the living standards of our citizens.
For a month now, together with the Institute for Economic Research, BIS has been working, within the framework of the Moldovan Government Support Program in the Field of Economic Policies (implemented by GIZ and funded by the Federal Ministry for Economic Cooperation and Development of Germany / BMZ and the Swiss Agency for Development and Cooperation / SDC), on a draft new strategy to attract investment and promote exports. It is clear that we are only at the beginning of the process of developing this document which is important for the development of the Moldovan economy - it will completed by the end of 2020, but by now we have managed to study international and regional trends in this area, including current trends and prospects for business development in EU countries. It is safe to say that Moldova has acceptable guidelines in this sense, as well as potential sources of financial and other resources for development. So, in early March 2020, the European Commission released a new “industrial package” which combines two EU strategies: industrial policy and the development of small and medium-sized enterprises (SMEs). Two main priorities are stated: the transition to a sustainable (green) and, at the same time, to the digital economy: Digital and Green Transition. These documents also determine the business development programs that the EU will support in the next decade. At the same time, the European Commission recently released a new vision of the Eastern Partnership policy after 2020, of which Moldova is a part. It is proposed to use multimillion-dollar financial support programs for SMEs from these countries that are focused on the above priorities.
It seems to me that the current crisis and the objective limitations associated with the coronavirus pandemic clearly demonstrate the relevance of these priorities for the Moldovan business, fulfilling, at the same time, the role of a catalyst in the sense of digital transformations in the economy and in public life.
InfoMarket: In your opinion, what percentage of the business, from the beginning of March, will survive after the crisis?
Valeriu LAZAR: I think that 70-80% will survive until the end of the year if it acts competently and responsibly. But we should not fear bankruptcies. We have a market economy, with its rules. If an asset is run by someone who uses it inefficiently, it makes sense for a quick transition of this asset to someone else, through legal market leverage, who will be more effective. The end result needs to be not saving a particular business at all costs, but so that later, when we exit this situation, new opportunities, new jobs with high salaries are created, there is more money in the budget and in the economy.
InfoMarket: To summarize. The world will not be the same. Business must go digital. The economy should strive to be green. Business needs to keep its people in a crisis ...
Valeriu LAZAR: Yes, to keep both people and partners, and customer relations. And at the same time, it is necessary to work on changing business models, look for other opportunities, organically migrate to new areas, but not go to extremes. There is a slogan in modern marketing, though it existed before the crisis: “differentiate or die!” Today, another is emerging: “rediscover yourself or die!” This applies to everyone, including us. We are working on it and are ready to help others to successfully pass through metamorphoses of their business - not only to survive, but also to get an impetus for successful development in the future.