Pavel Kohout: unconventional economist and government advisor

Pavel Kohout is an economist who seems seldom out of the media. He recently created a stir when he announced he was leaving the government’s advisory committee, NERV, and criticised government willingness to tackle multi-billion crown corruption in public tenders. That furore appears to have blown over and Mr. Kohout seems on course to give further advice to the government and the new political party, Public Affairs. I asked him how he got involved in economics in the first place.

Pavel Kohout

“I originally did not want to become an economist, I wanted to be a computer games developer. At the beginning of the 1990’s there was no such profession in the Czech Republic at that time. So I thought I could really make a big deal by writing a computer game which would be based on a simulation of the stock exchange because I believed that with the advent of privatisation people would be interested in securities, trading, the stock exchange and investing. And I was totally wrong. My game was a complete flop from the sales point of view. In all, I sold around seven copies, it was an absolute disaster. But the good thing was that out of the seven copies, four were bought by recently established privatisation investment companies and three of the four companies that bought the games instantly offered me a job. So I made a choice, I chose PPF Investment Corporation and that was my first job in the financial world. They thought I was an expert in finance at that time but they were wrong. I did not know anything about that so I had to first read a couple of dozen books, 30 or 40 books, on investment, economics and so on. I got into finance in an unconventional way: from computer games to finance. So I am a kind of unconventional economist, maybe.”

I presume you learnt pretty fast because it was not many years afterwards that you started to advise ministers?

Bohuslav Sobotka

“Well, in the 1990’s there was the second wave of voucher privatisation. I was already in business and took part in a team which was deciding about billions of crowns, which was almost incredible for me at that time. In the second half of the 1990’s I dealt mostly with government bonds working for ING Investment Management in Prague. At the beginning of the last decade, around 2002, I got my first invitation to be on a government committee. It came from the then Social Democrat minister of finance, Bohuslav Sobotka. He invited experts from the private sector, academic world and the state administration. The subject of the commission was to get public finances in order.”

And soon after you started with various other committees and various other political parties as well. Can you explain what happened at that time and what was your experience with these ministers. Were they prepared to accept advice and was it easy for an outside advisor to have a role in government?

“I should emphasize here that I did not really have a real job in government. I was always an external consultant, mostly working for free. I worked in my spare time and had to go on with my real job during that work. I was on an expert panel crated by the ODS (Civic Democrat) minister of finance Vlastimil Tlustý. It was only for a couple of months, it did not take too long. I was put on the second commission on pension reform last year and I was also a member of the government’s economic advisory committee, or NERV, according to the Czech abbreviation.”

And what was your experience on those bodies? Did you have the impression that ministers or departments were willing to accept advice or was the impression that they wanted to keep these outsiders outside? Basically, was it possible to make some sort of impression as an outside advisor or on an outside advisory body such as NERV?

“To some extent politicians or government officials were keen about outsiders’ opinions. On the other hand, there were some cases where insiders were not very curious about these people’s opinions. It differs from case to case. I cannot tell you that they did not care at all or that they hung on our every word.”

Your most recent mission with NERV concerned two major aspects I think: pension reform and the second was public tenders and corruption. With the second issue you had some problems with the Ministry of Regional Development and whether it was willing to create tenders and public tenders that would be more transparent and competitive and perhaps save the government more money in the future?

“Well, during the last six or seven months I was a member of the second NERV advisory body for the government which has about 15 members in total. I was on two sub commissions. The first was on pension reform and the other was on public procurement and corruption. The activity of the former has basically ended and it has submitted its final report. The other one has still to submit its final report and that is due in April this year. And there was a kind of misunderstanding when I announced at the beginning of this year that I was quitting NERV and many journalists thought I was quitting immediately and there was a kind of furore about it. In fact, I am still working with NERV and, what is more, last night I was offered to take part in health care, or rather health insurance reform, some commission. I agreed even though it will mean more work for me.”

Photo: Štěpánka Budková

But the problems with the Ministry of Regional Development were about how tenders should be framed and whether the competition office should be given adequate resources to oversee more competition for tenders which, theoretically, would save money for the government in the longer term?

“At some point I thought that the Ministry for Regional Development was rather slow with its proposal for the new law on public procurement. Last week we had a session of the NERV sub committee for public procurement with a representative from the Ministry for Regional Development and we tried to sort it out. And we found there were several points where we could reach agreement. There are still several other points which are still being discussed. And there are some points where there is a fundamental philosophical disagreement. Well, I believe at the next session, or next couple of sessions, we will be able to find a solution which would set out the rules for competition in public procurement and would be acceptable to the ministry. At the moment I am quite optimistic about our future cooperation with the Ministry for Regional Development. I was actually quite surprised at how keen were the reactions from the ministry. I thought they would refuse any criticism and to my surprise they accepted a lot of it and are really working to find a real solution.”

Pavel Kohout, photo: archive of the Czech Government

At the time of these reports about your leaving NERV it was also said that were going to act as an advisor for the new party, Public Affairs. Is that right?

“There is a grain of truth in that news. The truth is that during last year in October or November I was approached by Public Affairs with the proposal of being an external consultant, which is another part time job. Well, I got the impression that they were genuinely interested in what I was saying at that time and so I agreed with that proposal. I will be an external consultant for Public Affairs. But I am not a member of the political party and do not have any interest in standing in any future political elections.”