"It is the same, practically, as it was before under the previous government, which means they have not changed the system, only the faces."
Peter Mihók, President of the Slovak Chamber of Commerce and Industry
Peter Mihók says he is worried new economic package doesn't fit economic bill.
Courtesy of the Commerce Chamber
The Slovak Chamber of Commerce was established by an act of parliament in 1992, and represents Slovak companies and banks in their dealings with the state. In Mihók's words, the chamber is "the real voice of business in this country."
The Slovak Spectator (TSS): What is occupying most of your time these days?
Peter Mihók (PM): Naturally, it is the programme and the economic package of the new government. I am not so happy about the economic package, because I am afraid that its main aim on a theoretical level is to secure income for the state budget, and only in second position comes the stabilisation of the Slovak economy. In my opinion, it should be quite the opposite - fixed points for the stabilisation of the economy should take precedence over the needs of the state budget.
TSS: What is it about the economic package that makes you think that?
PM: What especially concerns me are import restrictions, because I have heard that the new import duty should be even as high as 20%. This has not yet been confirmed, but it would be the highest import tax ever introduced [in Slovakia]. In my view, our problems with foreign trade [a trade deficit above 10% of GDP] is not a question of imports, it is a problem of exports... Such an import duty would have a great impact on prices within Slovakia, and is even more dangerous given the aspirations of Slovakia to obtain EU membership.
I am also the chairman of the business and industry advisory council for the Organisation for Economic Cooperation and DeveloPMent [OECD] here in Slovakia, and we have very close links to this structure in Paris. [Finance Minister Brigita] Schmögnerová will be there next week, and she will present Slovakia's case for full membership in the OECD by the end of next year. But I am afraid that the new economic package will give her a lot of problems in convincing the people of the OECD, because the main goal [of the package] is the restriction of international trade.
TSS: What economic problems does the package not address?
PM: What should be most important in such an economic package is finding a solution to the financial situation of the country, especially the cost of money. In Slovakia at the moment, there is no motivation to invest in a company because if you put your money in the bank, you can earn up to 24% interest on it. If you invest in a company, you will have a lot of risk and your profit will be not more than 10%. So where is the motivation for people, even for small and medium-sized entrepreneurs, to put their money into their companies?
The second aspect of the high cost of money is that it destroys the competetive advantage our firms have over western companies. On the one hand, we have lower costs for the energy used in production, as well as lower labour costs, but we have eliminated our production advantages with the situation on financial markets. If your competition pays3 to 4% for money and you have to pay 20 -24%, you lose the advantages conferred by lower energy and labour costs, meaning that you also lose markets for your products.
TSS: Is the new government a pro-business government?
PM: It's difficult to say. We hope that it will be business-friendly, which means that they must create a better framework than there was before. This means, in turn, good legislation, fewer restrictions and greater stability.
In creating its economic programme, this government will be under a lot of social pressure, generated by the needs of sectors like health care, education and so on. How will they balance it all? Ministries will be under the pressure of daily needs, and sometimes, economic issues are less important in terms of decision making.
Also, even in economic affairs, this government is too politically oriented, and naturally, there will be pressures from each political party which is fighting for its own programme. What is dangerous also are the nominations for the heads of state-owned companies. We are very strongly against these political nominations, because these companies are among the strongest in the country, so their managers should be very professional and less political.
If the cabinet decides, for example, that one company will go to the SDK, while another company will belong to the SOP, and so on, this is the wrong approach, and it concerns us. We had discussions with the parties before and leading up to the elections, and we asked them to eliminate this practise. It is the same, practically, as it was before under the previous government, which means they have not changed the system, only the faces. That is the problem with the new government - they are very politically oriented.