World Bank praises Slovakia's efforts to improve business environment
A recent report from the World Bank praises Slovakia as being the country which improved its business environment the most during the last year. The report called Doing Business 2005 praises the country for passing reforms to fiscal and labour policy, reducing the time needed to set up new businesses, reducing red tape and improving the debt collection system.
Roger Growe the Head of World Bank's Office for Central Europe explains.
"Slovakia made the most progress of any country in reducing the cost of starting a business. The labour market reforms in Slovakia resulted in Slovakia having one of the lowest costs of firing workers, in other words increasing flexibility in the labour market and one of the lowest ranking in terms of rigidity of employment. Slovakia also ranks at the top in terms of legal rights of the creditors and in terms of rules of disclosure resulting in the protection of investors."
The report comes as a breath of fresh air for Prime Minister Mikulas Dzurinda whose reformist government has been embroiled in bitter internal political wrangling for most of the last year.
"This excellent result is the proof that the reforms this government has initiated work. Its message is that political stability can improve the economic performance of our country and bring prosperity."
I asked the economist Robert Prega what impact such a positive report could have on the future of the Slovak economy.
"It's a positive signal of course for foreign investors. We have already seen the effects of this changed economic approach particularly when the influx of foreign direct investment has increased and we expect it will increase in the next three or four years. And of course it's the most critical aspect that can increase the export performance of the Slovak economy and then its competition. It's influencing of course the financial markets too because the changed approach of foreign investors is the key factor why the crown, our currency, has been appreciating in the last two years."
"There is still some time lag till the macroeconomic indicators will be felt in household consumption. But it has already started to change this year and it should be felt more mainly next year. There was some increase in the energy prices at the beginning of this year but from next year we expect stability in regulated prices and inflation will decrease markedly somewhere to 3 percent and this will be the main factor why real wages will increase quite strongly in the next year and the positive macroeconomic figures could be felt more strongly by the people."
However Robert Prega says that Slovak authorities shouldn't get too infatuated by the Doing Business report.
"The weakness of doing business is corruption. Despite the recent improvement there are still problems with the enforcement of the law in line with the bankruptcy law. There is still a long time for people to wait until they are able to exit the business."
On the same day the World Bank report was published, the Slovak Statistical Office said that the GDP growth for this year will be slightly higher than initially forecast.