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NEW MEASURES TARGET SLOVAKIA'S WIDENING TRADE DEFICIT

Cabinet unveils economic plan

In the last week of June, the Slovak government approved a wide-ranging set of economic moves that takes dead aim at the country's growing trade deficit The plan, however, is already being attacked by opposition leaders, who say the cabinet is shelving solving the real economic problems.
Some regulations from the economic package came into force already on July 1, such as a 10 percent hike in electricity prices for businesses, a law regulating wages in certain sectors, an increased consumer tax for fuels and oils (followed by an increase in gasoline prices by about 1 Sk/liter) and the reintroduction of a 7 percent import surcharge.

In the last week of June, the Slovak government approved a wide-ranging set of economic moves that takes dead aim at the country's growing trade deficit The plan, however, is already being attacked by opposition leaders, who say the cabinet is shelving solving the real economic problems.

Some regulations from the economic package came into force already on July 1, such as a 10 percent hike in electricity prices for businesses, a law regulating wages in certain sectors, an increased consumer tax for fuels and oils (followed by an increase in gasoline prices by about 1 Sk/liter) and the reintroduction of a 7 percent import surcharge.

Jozef Mach, the Finance Ministry's spokesman, said the regulations were not a panacea, but said they would be effective when other legislative tools went into effect. "The quality should come once the bankruptcy law is in force and the quality of Slovak products increase," he said. "If 'Made in Slovakia' products were able to compete on foreign markets, we would not have to adopt such regulations."

But according to Ľudovít Černák, a former economy minister and a deputy for the opposition Democratic Union, the package will have a negative impact on Slovak businesses. "Instead of developing business activities and easing conditions for those who have good results, [the government] increases electricity prices for entrepreneurs in general," Černák said. "[As a result], businesses will have to increase their prices, which will strike back at consumers in an overall 3-5 percent increase in prices."

"It is [always the same] big business circles - beer producers, steel producers and exporters of chemical products - who demand such solutions," Černák said. "But in the past five years, not a single step has been taken to restructure the economy, support exports, and develop small and medium-size businesses."

Looking at the present situation, Mach said, "so far, about 20 percent of Slovak companies are self sufficient, but they have to carry the weight of those 20 percent of companies that should go bankrupt. If 50 percent of companies are able to compete, then we may speak of success."

"That is why I believe these regulations can improve the situation only partially," Mach continued.

Import surcharge is back

Perhaps the most controversial of the some 40 measures making up the new economic package was the reintroduction of the 7 percent import surcharge. Mach explained that the cabinet brought it back to replace the import deposit plan, which was dropped by the Slovak cabinet after the Czechs withdrew their own import deposit fee.

The import deposit means that a businessman has to pay a certain amount of money (in Slovakia it was 20 percent) for the imported merchandise in advance, with the money being deposited in an interest-free account for 6 months. "The Slovak Finance Ministry always opposed the [import deposit] measure," Mach said.

"In a way, [abolishing] it was a relief for small and medium size businesses, who do not have enough resources to make an advanced deposit," Mach said. The import surcharge, he continued, is a little better than that, but it is still criticized by the World Trade Organization (WTO), who lobbied the Slovak government to drop the measure altogether in fall, 1996.

"It will affect some 80 percent of products imported to Slovakia. This is what the WTO criticizes," Mach said. "It is artificial protection of our businesses and their products, which is not creating conditions for a global trade without barriers."

According to Mach, the government is counting on the surcharge to bring in 10 billion Sk to the state budget. Beginning January 1, 1998, the surcharge will be lowered to 5 percent, then to 3 percent on July 1, 1998 and terminated by December 31, 1998.

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