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Slovakia slides in competitiveness

SLOVAKIA’S competitiveness rating has slipped for the seventh consecutive year. The latest Global Competitiveness Report, issued on September 4, ranked the country 78th, a seven-point decline compared to the previous year, and Slovakia’s lowest position thus far.

SLOVAKIA’S competitiveness rating has slipped for the seventh consecutive year. The latest Global Competitiveness Report, issued on September 4, ranked the country 78th, a seven-point decline compared to the previous year, and Slovakia’s lowest position thus far.

Slovakia is the second least competitive country in the European Union, with only Greece ending at a worse position - 91st. Prime Minister Robert Fico however does not regard the ranking as trustworthy, pointing to other international rankings that show the opposite. Opposition parties and businesspeople ascribe the drop in competitiveness to measures adopted by the Robert Fico government.

“The fall of Slovakia in the evaluation of competitiveness is a consequence of pessimism of businesspeople, which stems from barriers to business-making [that remain] unsolved in the long term, and from changes to the income-payroll tax system and labour legislation, which became effective at the beginning of this year,” said Róbert Kičina, executive director of the Business Alliance of Slovakia (PAS), as cited in a press release.

Kičina added that the main problems behind Slovakia’s worsening competitiveness are ineffective public institutions, weak law enforcement, red tape, clientelism, an unattractive tax system, low transparency and ineffectiveness of public spending, the increasing indebtedness of the state, a rigid labour code and a low-quality education system.

The report’s Global Competitiveness Index (GCI) placed Switzerland at the top of the ranking for the fifth year running. Singapore and Finland remained in second and third place, respectively. Germany moved up two places (4th) and the United States reversed a four-year downward trend, climbing two spots up to fifth, the World Economic Forum (WEF) wrote in its press release.

Within the Visegrad Group, Poland led for the first time, despite moving down one place to 42nd. The Czech Republic suffered a seven point drop, down to 46th, and Hungary’s ranking dropped three points to 63rd.

With regard to the development in Europe, the WEF wrote that efforts to tackle public debt and avoid a break-up of the euro have taken the focus off addressing deeper competitiveness issues.
The WEF survey covered 148 countries between January and April 2013. More than 13,000 managers took part.

Fico opposes the ranking

Prime Minister Robert Fico does not regard Slovakia’s latest ranking by the WEF as trustworthy. He notes that in Slovakia the survey was organised by PAS, whose executive director Kičina is politically opposed to the social-democratic government.

“He is a politically motivated man, who from the morning until the evening does not do anything else but pound away at the social-democratic government,” Fico said at a press conference on September 4, as cited by the TASR newswire. “When such a person organises any survey and sends these figures somewhere further, then we cannot trust these figures.”

Fico recalled that, for example, the World Bank’s current evaluation, Doing Business, lists Slovakia as the most attractive country for foreign investors within the Visegrad Group. Rating agencies evaluate Slovakia in a positive way too, Fico said, adding that Kičina has been criticising them for the last five years.

“This is why I enormously object to organising surveys in Slovakia in such ways and advancing these surveys further abroad,” said Fico. “I do not regard Mr Kičina and his statements to be relevant at all.”

Kičina refutes Fico’s criticism.
“It is not true that I am politically motivated,” Kičina told The Slovak Spectator. “I am not a member of any political party and PAS is by principle an apolitical business association, which has requested and will request from each government improvement of conditions for doing business.”

He recalled that not only PAS but also other business associations have criticised the current condition of the business environment in Slovakia.

In Slovakia, PAS partners with WEF in conducting the survey. Kičina specified that PAS sent the questionnaire to 250 large and 250 small and medium-sized companies, randomly selected using WEF methodology by a computer.

“After sending questionnaires to such selected companies, our work on the project is over,” said Kičina. “PAS cannot affect who will, in the end, join or not to join the survey. It is not able to affect or look into the individual answers of the respondents.”

Opposition blames Fico government

Opposition parties attribute Slovakia’s lower ranking to both the current and former governments of Fico.

“Slovakia’s economy has not been in a worse condition since the times of Vladimír Mečiar,” Daniel Lipšic, the head of the movement Nová Väčšina-Dohoda said, as cited by TASR. “During the first Fico government VAT evasion doubled, Slovakia became the second worst country, just behind Greece, in collection of VAT and in the size of tax fraud.”

The opposition believes that laws adopted by the current government played a major role in Slovakia’s worsening competitiveness. According to the opposition, the competitiveness decreased due to badly set tax rates, labour legislation, large bureaucracy at offices and a high level of corruption.

“Today unemployment is growing, we have record debt and the worst thing is that the outlook for Slovakia is not better,” said Ivan Štefanec, the deputy chairman of the Slovak Democratic and Christian Union (SDKÚ), as cited by TASR.

Miloš Moravčík, the deputy chairman of the Christian Democratic Movement (KDH), added that entrepreneurs ceaselessly complain that when they want to do business, state offices slow down the process. Once they get through the offices, then come the racketeers. If they survive the racketeers, some do not settle their invoices and, until the courts resolve the unpaid invoices, the company often goes bankrupt and lays off employees.

“This situation was partly caused in the past and it is difficult to solve it, but this government, instead of solving [the situation], only worsens the business environment,” said Moravčík, as cited by TASR. “It even imposes on those which manage to survive high corporate and payroll taxes.”

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