Competitiveness has fallen, says WEF

THE LATEST global competitiveness ranking for Slovakia is unlikely to make it onto the front page of the country’s public relations portfolio for attracting foreign investors for a very simple reason: Slovakia recorded its worst ranking ever. Slovakia fell 13 places to the 60th position in the 139-country global competitiveness chart released by the World Economic Forum.

THE LATEST global competitiveness ranking for Slovakia is unlikely to make it onto the front page of the country’s public relations portfolio for attracting foreign investors for a very simple reason: Slovakia recorded its worst ranking ever. Slovakia fell 13 places to the 60th position in the 139-country global competitiveness chart released by the World Economic Forum.

Slovakia is now the fifth least-competitive member of the European Union, ahead of only Romania (67th), Latvia (70th), Bulgaria (71st) and Greece (83rd). Slovakia’s ranking is now comparable with countries like Azerbaijan, Brazil, Vietnam, Turkey and Sri Lanka, according to the Global Competitiveness Report 2010-2011.

Cronyism was listed as Slovakia’s largest competitive disadvantage and the 2010-2011 report placed Slovakia in 127th position in that category.

The government of Iveta Radičová blamed the country’s decline in competitiveness on the policies of the previous government and on regulatory initiatives tuned in the wrong direction.



But Ľubomír Jahnátek, the previous economy minister, expressed doubts about the credibility of the report and attributed Slovakia’s lower ranking to political antipathy towards the previous government.

“Slovakia’s significant drop was caused by the worsening of the business environment, the low ability of the government to reform and remove barriers to doing business as well as the worsening of Slovakia’s macroeconomic results in the previous years,” Robert Kičina, the executive director of the Slovak Business Alliance, told The Slovak Spectator. He added that improving competitiveness by other countries also contributed to Slovakia’s falling rank.

“Of the total drop of 13 positions, 8 places could be attributed to the fact that other countries improved their competitiveness and achieved a better score than Slovakia last year,” Kičina said. “The drop of the additional 5 places could be attributed to the poorer macroeconomic results and the worsened environment.”

According to the current Ministry of Economy, the results stemmed from an unnecessary administrative burden placed on businesses by the previous government. Robert Merva, the spokesman of the ministry, said that the only attractiveness that Slovakia has today is its relatively low tax burden, the Sme daily reported.

Kičina said that because the competitiveness rankings developed by the World Economic Forum are among the most credible, it can be expected that Slovakia’s attractiveness as an investment destination will drop to a certain degree.

“It is true however, that international comparisons are rather supplementary information and not a deciding factor in investment decisions,” Kičina told The Slovak Spectator.

According to Kičina, Slovakia’s drop of 13 places in the ranking was the largest drop among all the EU countries. Greece fell by 12 positions in the 2010-2011 ranking. Of the Visegrad Four countries, Poland and Hungary improved their positions in the current report. The Czech Republic fell from 31st position to 36th.

Jahnátek stated that the ranking lacks objectivity and suggested that PAS, the local partner of the World Economic Forum, used the development of the ranking to slam the previous government as well as Slovakia, Sme reported.

Kičina responded that PAS only coordinates the survey and it picked 500 large and 500 small and medium-sized businesses based on their revenues in accordance with the World Economic Forum’s methodology. He further explained that of these firms, 220 were randomly picked and then given a unique access password to directly complete a questionnaire on the website of the World Economic Forum.

“PAS does not have a chance and has never had any intention of influencing the structure of the respondents,” Kičina told The Slovak Spectator. “It [PAS] does not access individual answers of the businesses [participating].”

Regarding steps that could be taken by the government to improve Slovakia’s ranking, Kičina said that the new government must first focus on improving the business environment and removing the long-standing barriers that make doing business more complicated.

“The World Economic Forum identified one of the top barriers as the high level of corruption and cronyism, as well as low enforceability of laws and ineffective functioning of public institutions, a high administrative burden, lagging education, restrictive labour legislation and a lack of transparency in public procurement,” Kičina told The Slovak Spectator.

Switzerland remained at the top the competitiveness ranking while the United States fell two places to fourth position, overtaken by Sweden which placed second and Singapore in third position.

"The Nordic countries continue to be well positioned in the ranking, with Sweden [and] Finland in 7th position, and Denmark in 9th position among the top 10, and with Norway at 14th,” the World Economic Forum wrote in its news release.

“Policy-makers are struggling with ways of managing the present economic challenges while preparing their economies to perform well in a future economic landscape characterised by uncertainty and shifting balances,” said Klaus Schwab, founder and Executive Chairman of the World Economic Forum, in the news release. “In such a global economic environment, it is more important than ever for countries to put into place the fundamentals underpinning economic growth and development.”

The World Economic Forum wrote that over 13,500 business leaders from 139 countries were polled to prepare this year’s report. The survey was designed to capture a broad range of factors affecting an economy’s business climate. The report also includes comprehensive listings of the main strengths and weaknesses of each country, making it possible to identify key priorities for policy reform.


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