Government to help poorer areas

THE GOVERNMENT recently introduced a new plan to help the least-developed districts in Slovakia fight the high number of unemployed people living in these districts via special action plans designed for five years. 

Illustrative stock photoIllustrative stock photo (Source: TASR)

Though some experts welcome the move, they question the the effectiveness of the plan and say just five districts meet the criteria.

The aid is one of 15 provisions within the second package of social measures introduced by the government on August 4, which will cost the state about €300 million. One of the first measures that the government will discuss at its session in late August will be halving the 20-percent VAT on selected foodstuffs and also the law concerning aid to the selected districts which is expected to take effect on December 1.

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“We’ll be holding consultations in Bratislava on August 18 with mayors, entrepreneurs and local municipal officials from areas where the jobless rates top 20 percent,” Prime Minister Robert Fico said, as quoted by the TASR newswire. 

The condition for getting the aid will be to have an unemployment rate amounting at least to 1.9 times higher than the national average over at least nine of the 12 past quarters. Currently there are four districts that may meet this threshold: Rimavská Sobota, Revúca, Kežmarok, and Rožňava. Soon, Poltár may join the group, public-service Radio and Television of Slovakia (RTVS) reported.

“We have already seen similar changes in the history of investment aid,” Martin Vlachynský, analyst with the Institute of Economic and Social Studies (INESS) think tank, told The Slovak Spectator. “But the positive effect on the least-developed districts has been minimal so far.”

He does not expect the new proposal to make any difference.

Tailor-made plans

Whether a district is entitled to the special aid will be assessed by the Transport Ministry, which will also prepare a tailor-made five-year action plan within six months. It will, among other things, contain an analysis of the district’s economic situation and the reasons for its poor state of affairs, an evaluation of development potential, a proposal with specific measures and the schedule for their implementation, financing, and how to evaluate achieved progress, said ministry spokesman Peter Zeman.

“The specific measures to support the districts will come as a result of the specific action plan prepared in cooperation with experts from the ministry and the respective regions,” Zeman told The Slovak Spectator.

The action plans will then be scrutinised by the newly-created Council for the Development of Regions, whose composition will change depending on the districts asking for help, officials say. After it develops the plan the ministry will submit it for the government’s approval, TASR reported.

The districts will then receive aid in two forms. First is technical aid, which means the handing down of knowledge, experience and specific know-how, which should enhance the administrative capacities of municipalities and other local institutions. The second form, the regional contribution, will be allocated from the state budget and will be provided based on the action plan, Zeman said.

The proposal also contains provisions that amend the law on investment aid. Under the proposed rules, if businesses want to invest in the industrial or tourism sector in the least-developed districts, the minimum amount they will have to invest will be €200,000 and 50 percent must to be covered by the investor’s capital. Moreover, the state will contribute 70 percent of the amount invested into purchasing new machinery, with the investor paying only 30 percent of the sum, TASR wrote.

There will also be a condition that for industrial investments the project is required to create at least 10 jobs while tourism investments need to create at least five jobs.

“We hope the submitted proposal will positively impact creating and especially preserving the jobs in regions with the highest unemployment rates,” Miriam Špániková, spokeswoman for the Federation of Employers’ Associations (AZZZ), told The Slovak Spectator when commenting on the proposal. 

However, she is concerned whether people from the poorer regions will fulfil the professional requirements of a potential employer.

The threshold may change

The non-parliamentary Sieť party disagrees with the new law, questioning its effectiveness.

“It currently does not concern even 10 percent of Slovakia’s districts and the promises of support it contains are very vague,” Sieť Chairman Radoslav Procházka said, as quoted by TASR.

Zeman, however, stressed that the government is trying to help all regions, with the fight against unemployment being one of the main tasks of the government. Both the Labour and Finance ministries have programmes to help people find jobs, he said.

The government is also focusing on infrastructure. Currently, more than 120 kilometres of new roads are under construction, with the highways being built mostly in the north and south of the country. The Transport Ministry is working on projects that will better connect the southern and eastern districts with the European highway network, according to Zeman.

“So the government has not resigned from fighting unemployment in districts which are not subject to this law,” Zeman added. “Moreover, the law allows changing the threshold.”

Other suggestions

The Sieť party suggests substituting the government proposal with a clearer model of supporting investments via regional economic zones. Under the Sieť plan investors would immediately receive 15 percent of their investment back if the unemployment rate in the district exceeds 15 percent. In case of districts with more than 20 percent unemployment, investors would receive 20 percent of the total investment, reported TASR.

The non-parliamentary SKOK party has questioned both the government’s proposal and the plan proposed by Sieť saying it will not help people.

“It is not for them but for politicians who will make their campaign for people’s money,” SKOK’s Chairman Juraj Miškov said, as quoted by TASR, adding that the action plans are only a theatre in which “Bratislava-based clerks will prepare action plans for districts they have never visited”.

According to Miškov, it is necessary to introduce the decentralisation of competencies, money and also power.

Vlachynský, on the other hand, says that the least-developed regions need a complete makeover of their business environment. Among the measures that might improve the situation is a region-based minimum wage, bigger tax relief for certain regions that would include not only health transfers but also social payroll taxes in order to help people with low qualifications or a zero tax on re-invested profit which would motivate companies to invest. He also suggests giving more competences to municipalities.

“The revolutionary step would be the creation of special pro-business zones in the poorest regions, which for example would have special rules for taxes and regulation,” Vlachynský added.

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