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'Political nominees' cause fresh scandal

Yet another scandal involving a political party's use of a state-owned firm to raise money for itself surfaced last week, and left analysts despairing of the will of the current government to root out corruption within its own ranks.
The latest scandal erupted when it became known that the printing firm Prima Print, 80% owned by the ruling coalition Democratic Left Party (SDĽ), had last year signed an exclusive four-year contract to supply the state owned insurance firm Slovenská poisťovňa (SP) with stationery. The contract, the value of which was not disclosed, was signed on poisťovňa's side by SP president Rudolf Janáč and member of the board Vladimír Hudec. Both were nominated to their posts by the SDĽ following 1998 elections.
Both Prima Print and the SDĽ refused accusations of clientelism. "It is absurd to say that the contract is clientelist, nobody influenced anybody," said Ján Richter, secretary of a senior SDĽ body, the republican council.

Yet another scandal involving a political party's use of a state-owned firm to raise money for itself surfaced last week, and left analysts despairing of the will of the current government to root out corruption within its own ranks.

The latest scandal erupted when it became known that the printing firm Prima Print, 80% owned by the ruling coalition Democratic Left Party (SDĽ), had last year signed an exclusive four-year contract to supply the state owned insurance firm Slovenská poisťovňa (SP) with stationery. The contract, the value of which was not disclosed, was signed on poisťovňa's side by SP president Rudolf Janáč and member of the board Vladimír Hudec. Both were nominated to their posts by the SDĽ following 1998 elections.

Both Prima Print and the SDĽ refused accusations of clientelism. "It is absurd to say that the contract is clientelist, nobody influenced anybody," said Ján Richter, secretary of a senior SDĽ body, the republican council.

But other members of the ruling coalition lashed out at the deal. "Even though the law doesn't expressly forbid this [contract], from the moral perspective such things shouldn't happen," said Pavol Prokopovič, an MP for the governmental Slovak Democratic Coalition (SDK). "The one solution [to clientelism at state firms] is to privatise these companies," added Peter Zajac of the SDK.

Bad laws

The Prima Print case invited comparison with an earlier scandal involving an SDĽ nominee: in March this year, Štefan Košovan, then head of the state-owned energy utility Slovenské elektrárne (SE), was recalled from his post for clientist relations with energy sector companies.

But the SDĽ has not been the only party criticised for the misbehaviour of its nominees to state firms. The SDK, and in particular Prime Minister Mikuláš Dzurinda, was dragged over the coals by the Slovak media in late March for not acting sooner to fire the head of the State Material Reserves Administration, Ján Odzgan, who had been fingered in a classified secret service report as selling stockpiled wheat abroad for personal gain. Odzgan was eventually replaced last week with another SDK nominee, Stanislav Rajec.

The practice of appointing political nominees rather than business professionals to run state firms began under the previous government of Vladimír Mečiar, and was upheld by the current government in late 1998 when top posts were divided between the parties which had been victorious in September 1998 elections (see chart, this page, for details of which parties 'got' which firms).

Political professionals now say that shady deals, in which parties use state firms to funnel money into their own coffers or into those of business allies, will remain a part of Slovak life as long as the current system for financing political parties encourages corruption. Nothing will change, they add, until politicians find the courage to alter laws that encourage clientelism.

Few are unaware of the dangers of the current system. "Political managements [of state firms] are prone to act in the interest of their parties and are therefore dangerous for the successful functioning of these companies," said Peter Kresák, MP for the ruling coalition Party of Civic Reconciliation (SOP).

His view was confirmed by Peter Pažitný, an analyst with the Bratislava-based economic thinktank Mesa 10. "One of the motives for keeping political candidates at the top of these state firms is financing of political parties and defending private interests through little-known companies," Pažitný said. "Such behavior makes party financing untransparent and deforms the business environment."

But seeing the dangers is one thing, say those involved, and avoiding them quite another. "Even if we wanted to do this [nominate experts to lead state firms instead of political candidates], there are no criteria according to which we would choose the right person," said Kresák.

Grigorij Mesežnikov, head of the Institute for Public Affairs think tank, added that even setting such criteria and organising job tenders for state management posts could cause serious tensions in Slovakia's already shaky ruling coalition. "In 1998 [the start of the government's term in office], they believed that mutual control [each party running its own state firms] would be enough of a safeguard [against corruption]," he said. "But this proved untrue. In this situation, however, organising tenders could be a destabilising factor."

But business professionals have warned that if the government hopes to sell off its remaining state firms, corruption and political 'managements' must be curtailed. Martin Barto, head of strategy at the Slovenská Sporiteľňa state-owned bank, said that complex firms such as gas utilities or telecom monopolies needed expert guidance. "While the practice of putting political nominees in charge of state firms is not exclusively a Slovak phenomenon, the lack of control over the operation of these managements is causing major trouble [for the balance sheets of the firms concerned]," he said.

Mesežnikov noted that the key to change lay with laws governing the funding of political parties. Under the current system, he said, parties get too little money from the state to function, while oversight of their fundraising is shoddy and based on voluntary disclosure.

But although parliament will discuss an amendment to the Law on the Financing of Political Parties in September, few MPs have come out in support of the proposed changes. According to Mesežnikov, MPs fear the impact on voters of increasing state funding for parties. At the moment, only 3% of Slovaks are in favour of raising state support for political groups.

But for Kresák, who helped prepare the new bill, the reluctance of MPs to cooperate has been exasperating. "Currently the law proposes that parties should be given 500,000 Slovak crowns annually ($11,000) from the state budget per seat they hold in parliament, but that doesn't have to be the final figure," he said. "I asked each party to give its proposals as to how much they need per year to run their offices, but even this request caused big problems. Some were even offended."

Financing of political parties is not the only anti-corruption law that is running into opposition. An amendment to the law on money laundering, which would have required banks to report all suspicious transactions exceeding 50,000 crowns ($1,100) to higher state authorities, was rejected last week by cabinet as unconstitutional, winning the support of only Justice Minister Ján Čarnogurský and Interior Minister Ladislav Pittner.

"The decision to postpone the discussion of the law [on money laundering] is a hard blow to all who want to fight corruption, and help make state and private operations more transparent," noted Mesežnikov.

But Kresák said that the work of the current government was being undervalued by both the media and the public. "We [the ruling coalition] took over in a country that was in a state of serious financial and moral collapse," he said. "It's easier to corrupt people than to try and make them change for the better."

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