Industrial transition model Case Slovakia

Jaroslav Vokoun

Bulgaria, Latvia, Lithuania and Slovakia – Comparison of industrial transition models Sofia, Bulgaria, 6-7 October 2008

Consultative Commission for Industrial Change, EESC

Economic transformation process in Slovakia - dependency on the political cycle -

Development in 90’s

• creation of market economy• splitting of Czechoslovakia• imbalances (inflation, high interest rate, external imbalance,

unemployment etc.) • weak reforms• strong influence of domestic lobbies • preference of domestic entrepreneurs in privatization –

„Slovak way“• weak transparency• weaker orientation to EU

Development after 1998

• new government with new ideas• stabilization programs• clear orientation to EU, influence of EU• creation favorable business environment • starts reform process• recovery of bad debts in banks and banks privatization to

the foreign banks• active support of FDI• government sold the controlling interest in companies

Selected economic indicators

1992 1993 1998 1999 2004 2005

Real GDP growth (%) -6,5 -3,7 3,7 0,3 5,4 6,1

Balance of export and import (Bill. SKK)

-27,3 -89,5 -26,0 -27,2 -49,7

Inflation (%) 10,5 23,1 6,7 10,6 7,5 2,7

Unemployment (%) 10,4 14,4 15,6 19,2 13,1 11,4

Real wage index 1990=100

78,2 75,1 93,6 90,8 92,5 98,2

Source: Statistical office, 2006.

The evolution of industrial policy in 90’s

• slow changes in the Ministry of economy of the Slovak Republic

• industrial policy was isolated part of economy policy• direct support to the large noncompetitive companies• protection of the strategic companies• focus on privatization

The evolution of industrial policy after 1998

• new government changes policy and makes market oriented reforms

• the standardization of the industrial policy: influence of a Community action programme to strengthen the competitiveness of European industry (96/413/EC) and Industrial policy in an enlarged Europe (COM(2002) 714 final)

• gap between ideas and realization of industrial policy (policy is more declarative)

• active support of FDI

Present targets of industrial policy

• favorable business environment• knowledge transfer, R&D• education and skills• ICT

The example of a highly successful policy measure

• FDI support• focus on automotive sector, electrical engineering,

services (logistic, call centers)• support from EU structural funds

Positive results:

• new corporate culture• technology transfer• employment • labour productivity • export• partial change of economy structure • pressure on education system

The example of a less successful policy measure

• gap between ideas and realization of industrial policy • insufficient coordination among different policies• general support without focus strategy• support of non competitive firms• high portion of non-innovative firms in SME• national innovation system with a weak links among

participants• low R&D expenditure• strong metal and chemical industries with high energy

consumption and significant ecological influence

Summary innovation index and trends (2005)

Source: European Innovation Scoreboard, 2006.

Summary innovation index and trends (2007)

Source: European Innovation Scoreboard, 2008.

Innovation performance

Positive development: Applications Sales of new-to-market products Medium-tech/ high-tech manufacturing employment

Weaknesses: Knowledge creation Low business R&D expenditure

Thank you.

Ďakujem.