Download Industrial transition model Case Slovakia

Industrial transition model - Case Slovakia
Jaroslav Vokoun
Transformation process depends on the political cycle. During 90’s governments were oriented to
the massive privatization. Non transparent privatization linked firms and political parties.
Transition from a centrally planned economy to a market economy in 90’s was a conflicting
process connected with splitting of Czechoslovakia, imbalances (inflation, high interest rate,
external imbalance, unemployment etc.), strong influence of domestic lobbies, weak transparency
and weaker orientation to EU. The steep decline in domestic production in the early 90’s showed
a weak competitiveness of firms in the open economy. However, competitive firms found new
markets for their production in EU. The country's trade pattern has changed fundamentally since
1989 when most trade was with the Soviet Union and other socialist countries. In 1994 export to
industrialized countries in EU increased to 71 per cent.
After 1998, new government offered new ideas. There was a clear orientation to EU. Initial steps
were joined with stabilization programs, recovery of bad debts in banks and banks privatization
to the foreign banks. Government sold the controlling interest in non financial companies.
Reform process, active support of FDI and creation favorable business environment led to the
high economic growth. Domestic owners mainly sold their companies to foreign companies.
Nowadays FDI have dominating influence in the Slovak economy.
Ministry of economy prepares and implements industrial policy. In 90’s it used old methods of
the work, so industrial policy did not bring changes in economy structure. Industrial policy was
isolated part of economy policy. There was a direct support to the large noncompetitive
companies, protection of the strategic companies and focus on privatization.
After 1998, new government changes policy and makes market oriented reforms. The
standardization of the industrial policy was influenced by 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). Lack of financial sources, weak trust and cooperation in
society give limits for industrial policy realization. Mistrust and lack of critical mass
technological firms limits creation of clusters. Active support of FDI is focused on automotive
sector, electrical engineering, services (logistic, call centers). Positive results of economic policy
oriented to FDI are new corporate culture, technology transfer, employment growth, high labour
productivity, export, partial change of economy structure, pressure on education system etc.
The example of a less successful policy is gap between ideas and realization of industrial policy,
insufficient coordination among different policies, general support of companies and support of
non competitive firms. Low innovative activity is weakness of SME. National innovation system
has a weak links among participants. Government and private sector have low R&D expenditure.
Metal and chemical industries have a strong influence in economy. Their high energy
consumption and significant ecological influence are waiting for solutions.
Present targets of industrial policy are favorable business environment, knowledge transfer,
R&D, education, skills and ICT. Support from EU structural funds can strengthen
competitiveness of industry in next years.