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AGREEMENT BETWEEN COALITION PARTIES CALLS FOR BOSSES OF STATE FIRMS TO BE EXPERTS FIRST, POLITICIANS SECOND

Tenders for top posts to boost transparency

The latest crisis in Slovakia's four-party coalition government was defused on March 28 when a senior government body agreed to review the conduct of all directors of state-owned banks and monopolies. The bargain answered some of the demands of the Democratic Left Party (SDĽ), which had been incensed when Štefan Košovan, the SDĽ-appointed manager of state electricity utitlity Slovenské Elektrárne, was sacked in mid-March for mismanagement.
SDĽ Chairman Jozef Migaš told media after a meeting of the Coalition Council last Wednesday that if the personnel audits revealed wrongdoing at other state-owned institutions, new directors would be found through a series of expert tenders rather than through political appointment. The deal represented a compromise between Deputy Prime Minister Ivan Mikloš' call for expert tenders and the SDĽ's claim that its appointees were being singled out for the new policy.

The latest crisis in Slovakia's four-party coalition government was defused on March 28 when a senior government body agreed to review the conduct of all directors of state-owned banks and monopolies. The bargain answered some of the demands of the Democratic Left Party (SDĽ), which had been incensed when Štefan Košovan, the SDĽ-appointed manager of state electricity utitlity Slovenské Elektrárne, was sacked in mid-March for mismanagement.

SDĽ Chairman Jozef Migaš told media after a meeting of the Coalition Council last Wednesday that if the personnel audits revealed wrongdoing at other state-owned institutions, new directors would be found through a series of expert tenders rather than through political appointment. The deal represented a compromise between Deputy Prime Minister Ivan Mikloš' call for expert tenders and the SDĽ's claim that its appointees were being singled out for the new policy.

Although easing tensions within the coalition, the promised tenders will likely not end the practice of political parties putting their nominees at the heads of state companies. Foreign investors welcomed the initiative, but said they would watch the process closely to see if cronyism was actually being eliminated.

Eye for an eye

After Košovan was dismissed from Elektrárne on suspicion of awarding contracts to party sympathisers, Deputy PM Mikloš called for an independent tender process to be introduced for the selection of managers for top state companies. SDĽ Vice-Chairman Peter Weiss, however, dismissed the call as hypocrisy, and urged Mikloš' SDK party to examine the relationship between Prime Minister Mikuláš Dzurinda and Dušan Jurčák, the president of the state bank Slovenská Sporiteľňa.

"Mr. Mikloš said that the firing of Košovan was the first result of a fight against corruption," said Weiss. "Does that mean that Mr. Mikloš doesn't consider the friendship between Mr. Dzurinda and Jurčak as smelling of clientelism? Or is it clientelism only in the case of friendship between our head Jozef Migaš and Košovan?"

But Mikloš said the performance of the the bank's president and of other SDK appointees made it unnecessary that they be recalled from their positions. "There aren't any reasons to recall, for example, Mr. Jurčák from the post of president of Slovenská Sporiteľňa because everyone can see that the bank is on track," he said.

Heads of the large state natural monopolies such as gas giant Slovenský Plynárenský Priemysel (SPP) and telecom firm Slovenské Telekommunikácie (ST) were appointed as part of an unwritten agreement between the coalition parties - the SDK, SDĽ, Hungarian Coalition Party (SMK) and the Party of Civic Understanding (SOP) - following their election victory in September 1998.

The fact that each state firm was 'led' by a different party was supposed to provide a system of cross-controls among government parties on the running of the companies, and thus some measure of protection against a return to the cronyism that government officials declared was a feature of the previous Movement for a Democratic Slovakia (HZDS) government led by Vladimír Mečiar.

However, the recall of Košovan and long-simmering criticism of the way SDK officials handled affairs at SPP have led potential investors to question the transparency of state firm administration and the health of the business environment in Slovakia.

"We are watching Slovakia, as we do with all countries in central and eastern Europe," said John Miller, senior manager for international business development at Raytheon Systems Company, an American firm considering investment in Slovakia. "Of course [these type of appointments and transparency in general] are obviously a criteria for us when considering investment. The business environment is important to us."

However, Raytheon officials were quick to stress that not all government appointments to large firms were detrimental. "They [the government] may have very good and valid reasons for making appointments. Just because someone is picked by the government doesn't mean that he is necessarily the wrong person," said John Scherer, vice-president at Raytheon International Inc. Europe.

Some government members, including Mikloš, are looking to move quickly to dispel the doubts - hence the proposed tenders. "I believe that this option [independent tenders] is the best option [for state companies] after privatisation," said Mikloš.

He added that it would be easy to set up an independent tender commission and establish strict tender rules to minimise the danger of non-transparency. However, the SDĽ's Weiss cast doubt on this, saying that even these could not guarantee a completely transparent process of appointments to top jobs.

"These big state companies come under the Ministry of Economy, and I am personally afraid that current Economy Minister Ľubomír Harach will take this opportunity to put his people in the top posts in these state companies, all the while claiming that tenders are transparent," Weiss said. "I realise that the system of cross-controls is not an ideal one, but show me something better."

Despite Weiss's objections, the move towards greater transparency in the appointment of managers at state firms was welcomed by analysts, who claimed that the companies had been dogged by politics.

"Look at SE, where strong political links have slowed down the process of privatisation. This example speaks for itself," said Ján Tóth, a senior analyst at ING Bank. "The tenders might not be fully transparent, but the current political influence in the companies will definitely be lowered," he added.

The current furore around Košovan's dismissal has led to renewed speculation on the stability of the coalition government. With opposition leader Mečiar pushing for early elections, the government is looking to provide at least a veneer of internal cohesion. Mikloš said that any threat to the government from the affair surrounding the former SE chief would be swiftly dealt with.

"If this call for independent tenders should damage the stability of the government then the SDĽ will be asked to provide the government with a list of suitable candidates for the post of the SE general manager and the Economy Ministry will choose the one who is acceptable, exactly as was the case with the current FNM [National Property Fund] President Jozef Kojda," said Mikloš.

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